According to The Wall Street Journal, this is now the norm:
High demand and aggressive pricing have pushed the price of many second- and third-tier Manhattan hotels like Sheratons, Hiltons, Radissons and Marriotts over $500 a night for business travelers. Even a Comfort Inn with plastic orchids in the lobby and a pre-paid calling-card vending machine (exact change only) was recently priced at $429.
Ultimately, I found a room for $200. But it's no-frills. As in no alarm clock, no desk/table/chair for me to work in, and no closet. And the bed is not particularly comfortable. And I'm lucky that I'm not sharing a bathroom. And it's a third-floor walk-up.
(Pictures to follow when I get home.)
Oh, and did I mention that it's WAY far away from where I have to be first thing tomorrow morning?
Still, it's not the crappiest place I've ever stayed in. Heck, it's not even the crappiest hotel I've been in in New York. There was one hotel room that had holes in the wall and dirty linens. I walked in the room, took a look around, and went right back downstairs to check out. I then sat in the lobby for an hour, yelling at my travel agent until she found me another room somewhere else.
Update: Here is the picture of the hotel room, taken with my crappy cameraphone: