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ew York City's hotel industry appears to be thriving, but it's also facing a crisis. On one hand, hotels have made significant strides in occupancy rates and revenue per available room (revPAR), which has improved since the pandemic. However, these gains are still short of pre-pandemic levels.
According to Vijay Dandapani, president and CEO of the Hotel Association of New York, "The market did not recover as compared to 2019." Despite this, analysts predict a bright future for hotel owners due to limited new construction. Kevin Davis, CEO of JLL's Hotels and Hospitality Group for the Americas, notes that the demand-supply imbalance will favor owners in the next five to seven years.
New hotels are opening in areas like Times Square, including the Hard Rock Hotel and Tempo by Hilton. However, these additions are not enough to offset the loss of rooms due to city restrictions on new construction. Since 2019, the city has lost between 13,000-19,000 rooms, with many properties converted for migrant housing.
Investment-sale values have held up, with recent deals like the sale of the Thompson Central Park and the Park Lane Hotel. However, appearances can be deceiving. Davis points out that new projects face a lengthy approval process, which has slowed down development since 2021's legislation requiring special permits from the City Council.
The city's occupancy rate is still 4% behind 2019 levels, while revPAR is 20% lower despite recent gains. This is concerning given the significant reduction in room inventory due to closures and conversions. Even improvements in price metrics show signs of slowing down, with a deceleration in RevPAR growth.
The industry faces another challenge with the City Council's proposal for new licensing requirements, which has sparked opposition from some industry groups. As the market continues to evolve, it's worth noting that the city's room inventory was once much smaller than it is today, and history suggests that the market will eventually regain its equilibrium – but when remains uncertain.
