According to
this, NYC hotels operated at 85.3% occupancy rate in 2011.
This really does not surprise me at all, it is remarkable how underdeveloped the area around Penn Station is. There's that awful corner on 34th and 8th with a Duane Reade, and a Burger King. Then that restaurant that overlooks MSG that's about two or three stories on the same block as 1 Penn Plaza. There's even a surface parking lot right off 8th on 31st across the street from the Garden.
I would imagine that this is just the first of a string of new buildings in that immediate area.