Some good news, some bad With hotels.

Almost one year after Sept. 11, the stability of New York City's lodging industry is debatable. By some measures city hotels are faring better than anticipated earlier this year. Tourists have inundated the city in recent months, boosting occupancy rates and lending a needed hand to an industry that was decimated immediately after the terrorist attacks. Yet business travel remains sluggish due to the volatile economy.

"People are guardedly optimistic about the hotel business improving. Nobody knows what will happen with the stock market, which is closely tied to business travel," said John Fox, a senior vice president at PKF Consultants.

The period between Labor Day and Christmas is historically a busy season for New York City hotels. This explains why the timing of last year's terrorist attacks was particularly lethal to the hotel industry. This year presents an altogether different scenario, however. In a bizarre twist, tourists may in fact be drawn to the city on the one-year anniversary of the attacks as plenty of events will pay tribute to those who died. It is still anyone's guess how the business will fare for the balance of this fall.

Some hotels are opening up this fall. The Westin Times Square is set to open mid-October. The hotel--which is owned by Starwood--will boast 863 rooms, making it one of. Times Square's larger hotels. Elsewhere in Manhattan, the Hampton Inn chain is expanding in several neighborhoods, including Chelsea.

PKF market data reveals a disparate sampling of room rate and occupancy declines throughout the city. The average room rate in New York City fell 12% over the past year. Yet the occupancy rate declined only 1.7%, according to PKF data released last week.

Hotels located below 42nd Street saw an 18% decline in their room rates between June of last year and last month. The smallest decline in rates was noted above 59th Street, where the rate declined 9% between June 2001 and June 2002.

Occupancy rates at hotels below 42nd Street fell 7% during the first six months of this year.

On the basis of size, New York City hotels with over 750 rooms saw their daily room rate drop 14% on average between June of 2001 and last month. That represents the biggest single decline by property size. Hotels with less than 300 rooms only saw their rates decline by 7% between the same periods.

Fox predicts that business travel will rise by mid-year 2003. When asked if lower room rates would persuade some firms to send their executives to New York City, Fox responded that cheaper rooms aren't that big a draw to firms.

"Historically, business travel into New York City is not that rate sensitive. People will come here because they have to come here. It's New York City," said Fox.