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ew York City's hotel sector is facing a critical juncture due to a significant decline in available rooms. Since 2019, the city has lost around 6,000 hotel rooms, with half of those being in Manhattan, according to JLL. This shortage has been exacerbated by the conversion of over 16,000 rooms into migrant housing in response to the influx of arrivals.

    While there are approximately 8,000 new rooms in development, the pipeline is largely frozen due to a 2021 City Council bill that requires a special permit for new hotel developments. Developers are hesitant to invest in projects that require this extra layer of approval, leading to a shortage of available rooms.

    As tourism levels return to pre-pandemic numbers, the lack of available rooms has driven up daily rates, according to Ariel Property Advisors' Shimon Shkury. The long-term implications of these factors could be severe, with some experts predicting that many hotels may not return to their original use. Instead, owners may opt for alternative uses such as longer-term housing or multi-family developments.

    The situation is not unique to New York City, with construction costs and other headwinds affecting the hotel sector nationwide. However, the city remains a leader in new hotel development, with many proposals including at least one hotel component. The potential arrival of downstate casinos could also provide a boost to the hospitality industry, although it may be several years before these projects come online.