Crain’s New York Business: Tourism leaders say inflation is unlikely to derail city’s slow comeback

By: Cara Eisenpress

July 15, 2021

 

High prices for car rentals, airfare, hotel rooms and restaurant meals made it more expensive to be a tourist in June in most the country.

 

But as prices rise elsewhere, New York City’s snail-paced tourism recovery is likely keeping a cap on the cost to visit.

 

Nationally, consumer prices rose 5.4 percent in June over a year earlier. In the New York region, which includes Newark and Jersey City, N.J. the increase was smaller: 4.1% over June of 2020, according to the Bureau of Labor Statistics.

 

Nationally, prices for a night at a hotel rose by 16.9% between June 2020 and June 2021; rental car costs were up 87.7% year over year; airfares rose 24.6%. Comparable data is not available for the New York area.

 

In New York there’s less price pressure, at least for hotels, for such a rise in rates, said Vijay Dandapani, the president and chief executive of the Hotel Association of New York City. “As long as occupancy is below the 85% level we had prior to Covid, there is not enough compression to drive rates up.”

 

In addition to over 40,000 rooms that have yet to reopen because of the pandemic closures, there are another 8,570 new rooms expected to be available by the end of 2021, according to STR, a firm that tracks hospitality data.

 

For the week ending July 10, visitors did not fill hotels anywhere near that level, and occupancy was at just 65%. High-end properties are the exception, Dandapani said, since low rates might look bad for their brand.

 

Tourists are getting an additional break on hotel rooms this summer because of the suspension of the 5.875% occupancy tax through Aug. 31. Mayor Bill de Blasio temporarily eliminated the tax to make a visit more appealing.

 

Google searches for flights to New York and the term “visit New York” from within United States were rising steadily, with no sign of a slowdown because of prices. “It’s coming back.,” said Nicholas Colas, co-founder of DataTrek Research.  “Not at 2019 levels but getting there. European tourists are not yet allowed to visit this county, though the federal government will have to renew that ban later this month. Visitors from the United Kingdom used to provide New York City’s highest share of international tourists.

 

Other high costs that might impede visitors from popping into Orlando, Fla., or Las Vegas, N.V., aren’t relevant here, said Barbara Denham, senior economist at Oxford Economics. “We are in a dense part of the US, have train access to the city and most do not rent cars here,” she said. “Many can and will drive to the city over flying to other cities,” she said.

 

The cost to rent a car was up 87.7% over last June. Traffic in the region was expected to be back to normal for the July 4th weekend, according to the Port Authority of New York and New Jersey.

 

Of course, year over year numbers are comparing the relatively upbeat month of June 2021 to a time when the nation was just coming out from its strictest shutdown—June 2020. National comparisons between June 2021 and May of 2021 show a somewhat less dramatic picture of prices rising. Car rentals were up a seasonally adjusted 5.2% and airfare 2.7%, both less of an increase than in previous months. The cost of a full-service restaurant meal was up 4.1% over last year, but just 0.8% over last month. For hotels, the month-to-month rise was 7.9%. Regional data is not seasonally adjusted, so it is hard to compare with the national figures.

 

Still, some individual businesses in the city have said they were raising prices, either to cover the cost of hiring staff or to pay for cleaning and equipment intended to keep customers safe from catching Covid.

 

Some of the cost of city meals comes a temporary 10% surcharge restaurants could add to bills during indoor-dining shutdowns, but that is supposed to expire in August.