Despite a flurry of new luxury openings, NYC’s hotel industry isn’t out of hot water, experts say

New York City hotels are booming. They too are in crisis. It all depends on which metric you rely on – but it’s fair to say that both statements are true.

The Big Apple’s hotel industry appears at first glance to have made an exciting comeback from the pandemic. A closer look shows that despite significant improvements in occupancy, room rates and revPAR (revenue per available room, the industry’s gold standard metric), hotel performance standards are still poor. Hotel Association of New York president and CEO Vijay Dandapani was blunt: “The market did not recover compared to 2019.”

But the long-term outlook for owners — if not for visitors — is good, analysts say, as the city’s restrictions on building new hotels severely limit the creation of new guest rooms.

“The supply-demand imbalance will be very favorable for landlords,” said Kevin Davis, JLL Hotels & Hospitality Group CEO for the Americas.

“The hotel market in New York City is poised for tremendous growth over the next five to seven years,” Davis said — in part because of a “lack of new supply.”

The lack of shortages may surprise tourists and New Yorkers, who see crowds coming and going from the new properties clustered near Times Square — Tempo by Hilton, Hard Rock, Hampton Inn, Home 2 Suites, Motto and the nearly completed Voco by IHG . Or at the shiny new Ritz-Carlton Nomad and Virgin hotels on Broadway in the 20s.

Many other indicators look encouraging on the surface for hotel owners and management companies. More than 62 million people visited the city in 2023, almost as many as in 2019. McKinsey & Co. It predicts that in 2025 there will be more tourists and business travelers than before the pandemic.

Investment-sale values ​​are maintained. Gencom recently paid a healthy $308 million for Thompson Central Park on West 56th Street. The 610-room Park Lane Hotel was sold to the Qatar Investment Authority for $623 million, or about $1 million per room, in 2023.

Everyone is looking forward to the reopening of Ty Warner’s Four Seasons Hotel on East 57th Street next month after three dark years and — perhaps — the reopening of the Waldorf-Astoria after eight years.

“The New York City hotel market is poised for tremendous growth over the next five to seven years, due in part to a lack of new supply.”

Kevin Davis, JLL Hotels & Hospitality Group CEO for the Americas

But appearances can be deceiving. Davis noted that the new projects all began before the City Council passed legislation in 2021 to require any new planned projects to obtain a special permit subject to the whims of the Council. Since then, said Dandapani of the Hotel Association, only five new proposals have been submitted and only one has been approved.

“It’s a two- to three-year process to get a permit, and then you have to factor in another two or three years to build,” Davis noted.

Dandapani said the fact that occupancy is still 4% after 2019, while revPAR is 20% lower, despite recent gains, is disappointing given that the city has between 13,000-19,000 fewer rooms than before in approximately 150 properties. different.

That’s partly because of Mayor Eric Adams’ deals with housing immigrants — most notably at Midtown’s Roosevelt Hotel. Turnover to migrant use contributed heavily to a net loss of 6,000 rooms since 2019, as new openings did not fully offset reductions, which included the 2020 closing of Pennsylvania’s 2,200 rooms. However, the city has at least 120,000 guest rooms, more than half of them in Manhattan.

Even improvements in price measurements show signs of slowing. PWC said 2Q RevPAR, for example, rose 6.8% from the same period in 2023 – but measures “while robust, continued to slow”. The strongest improvement in RevPAR was in luxury properties.

Another cloud over the industry is the Council’s proposal to create new licensing requirements – which Dandapan’s organization initially called a “nuclear bomb” but supported after the original bill was modified (other industry groups still oppose the bill). .

“We’ll see what the final law says,” Davis said.

Whatever the future holds, it’s helpful to remember that the city’s room inventory was once much smaller than it is today. The city’s guest room stock fell to just 72,000 in 2007. A construction boom gradually lifted the total to historic highs. No one can predict what the future will bring with almost twice as many rooms in the game. But if history is any guide, the market will eventually regain its balance. The only question is when.