Lorenzo Ciniglio
New York City hotels are thriving. They’re also in crisis. It all depends on what metrics you rely on —but it’s fair to say that both statements are true.
The Big Apple’s hotel industry at first glance seems to have mounted a stirring 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), the benchmarks of hotel performance still fall short. Hotel Association of New York president and CEO Vijay Dandapani said unequivocally: “The market did not recover as compared to 2019.”
But the longer-term outlook for owners — if not for visitors — is bright, analysts say, as city restrictions on new hotel construction severely limit the creation of new guest rooms.
“The demand-supply imbalance will be very favorable to owners,” said Kevin Davis, CEO of JLL’s Hotels and Hospitality Group for the Americas.
“The New York City hotel market is poised for a tremendous run over the next five to seven years,” Davis said — due in part to “the lack of new supply.”
That there’s a scarcity might surprise tourists and New Yorkers alike who see throngs coming and going from new properties clustered near Times Square — Tempo by Hilton, the Hard Rock, Hampton Inn, Home 2 Suites, Motto and the nearly finished Voco by IHG. Or at the gleaming new Ritz-Carlton Nomad and Virgin hotels on Broadway in the 20s.
Many other indicators seem superficially encouraging to hotel owners and management companies. More than 62 million people visited the city in 2023, nearly as many as in 2019. McKinsey & Co. forecasts that 2025 will see more tourists and business travelers than before the pandemic.
Investment-sale values have held up. Gencom recently paid a healthy $308 million for the 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 a room, in 2023.
Everyone looks forward to the reopening of Ty Warner’s Four Seasons Hotel on East 57th Street next month after three dark years and— maybe — the reopening of the Waldorf-Astoria after eight years.
“The New York City hotel market is poised for a tremendous run over the next five to seven years due in part to the lack of new supply.”
Kevin Davis, CEO of JLL’s Hotels and Hospitality Group for the Americas
But appearances can be deceiving. Davis pointed out that the new projects all started before the City Council passed legislation in 2021 to require every planned new project to obtain a special permit subject to the Council’s whims. Since then, the Hotel Association’s Danjapani said, only five new proposals were submitted and only one 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.
Danjapani said the fact that occupancy is still 4% behind 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 at roughly 150 different properties.
That’s due in part to Mayor Eric Adams’ deals to house migrants — most visibly at Midtown’s Roosevelt Hotel. The turnover to migrant use contributed heavily to a net 6,000-room loss since 2019 as new openings didn’t fully offset the reductions, which included the 2020 closing of the 2,200-room Pennsylvania. Still, the city has at least 120,000 guest rooms, more than half of them in Manhattan.
Even the improvements in the price metrics show signs of slowing down. PWC said 2Q RevPAR, for example, increased 6.8% from the same period in 2023 — but the measures “while robust, continued to decelerate.” 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 Dandapani’s organization first termed a “nuclear bomb” but supported after the original bill was modified (other industry groups still oppose the bill).
“We’ll see what the final bill says,” Davis said.
Whatever the future holds, it’s a useful 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 raised the total to historic highs. Nobody can predict what the future holds with nearly twice as many rooms in play. But if history’s any guide, the market will eventually regain its equilibrium. The only question is when.