Crain’s New York Business: Op-ed: City’s hotel industry is unfairly targeted

By DAVID PAZ

January 27, 2022 7:30 AM

 

Once the U.S. epicenter of the Covid-19 pandemic, New York—and its tourism industry—was on the rebound until the omicron variant arrived. Now the city’s recovering tourism and hospitality sectors are again in jeopardy, as travelers change their plans.

 

The city’s hotel industry—which lost tens of thousands of good-paying jobs during the height of the pandemic—isn’t projected to make a full recovery until 2025. Citywide, more than 200 hotels closed either indefinitely or permanently through the economic downturn. Only 100 have resumed operating.

 

The struggling industry was dealt another blow when Mayor Bill de Blasio in October enacted the “severance law,” which requires hotels shuttered by the pandemic to pay out millions of dollars more in severance—effectively unemployment—to furloughed workers. It’s money that the hotels simply don’t have. As a result, many owners might be forced to make the impossible decision one hotel owner was faced with recently, when he sold the Excelsior hotel to a developer who plans to convert the Upper West Side gem into a residential building.

 

Tax burden


Now a new report prepared for the Hotel Association of New York City shows that New York hotels experience a property tax burden that is double that of other major markets.

 

In 2019 taxes represented 9.4% of revenue; in 2020, that share ballooned to more than 30% on average.

 

At some hotels, taxes due far exceeded revenues during the height of the pandemic. On top of that disproportionate burden, property tax debt interest accrues at an annual rate of 18% on late payments.

 

The hotel industry—which has paid out an unprecedented half-billion dollars in unemployment and benefits to furloughed workers during the pandemic, in addition to the federal unemployment and enhanced unemployment benefits the workers received from the state—will continue to suffer if it’s made the target of bad policy to deliver cheap headlines.

 

A prime example is the severance law. It was rushed through in an undemocratic process, despite concerns raised by hotels over what the bill would mean for workers long term by punishing the industry in a city with an unemployment rate more than double the national average.

 

It’s not just hotels and the recovery of the tourism industry at stake when hotels are unfairly targeted. Before the pandemic, the hotel industry employed more than 50,000 New Yorkers—mostly immigrants and people of color—and raised $3.2 billion per year in city tax revenue. The industry also added $22 billion annually to our economy. When hotels lose, so do our workers.

 

Government action


Although business is returning with tourism picking up, it won’t be enough to get the industry back on its feet. If we’re ever going to recover, we need help from the government—or at least a reversal of its undue burdens. The city must suspend the late-payment penalty for hotels, and we need the mayor and City Council to step up and revoke the severance law.

 

David Paz is president of Omnia Group, a design, development and building firm that owns the Sister City hotel.