New York Daily News Op-ed: Slammed by the city’s severance law: A hotel executive says the new statute is utterly unfair economic punishment

New York Daily News Op-ed: Slammed by the city’s severance law: A hotel executive says the new statute is utterly unfair economic punishment

By HARRY KRAKOWSKI

November 2, 2021 5:00 AM

 

No New York industry made it through the height of COVID-19 without being knocked down — but while some industries are finally fighting back, our hotels and tourism industry has yet to get up off the mat.

 

As a hotel owner in New York City, I’ve spent the last 16 months during the pandemic doing everything I possibly could to keep my business from closing permanently and from laying off my employees. According to the latest Coldwell Banker Richard Ellis study, hotels won’t fully recover until 2025. Citywide, more than 200 hotels have closed either indefinitely or permanently. So, it was difficult to watch the mayor last month sign a new law that will likely mean the end for even more hotels, including mine.

 

Even more infuriating were the celebrations inside City Hall, with politicians congratulating each other on this nonsensical law. The “Severance Law,” which the Hotel Association of NYC filed a lawsuit to strike down, will require hotels shuttered by COVID-19 to pay out millions of dollars more in severance to furloughed workers that it doesn’t have: The latest report by Trepp  a provider of data insights to the structured finance, commercial real estate and banking markets — shows that 35 hotels in the city have defaulted on their loans, which is a total of $800 million with unpaid interest going back several months. This targeted tax will go into effect even though our industry has already paid out an unheard of half-a-billion dollars in unemployment and benefits, well beyond what other companies in other industries are required to pay. No such other law exists for any other industry.

 

The mayor and City Councilman Francisco Moya say this bill is not intended as punishment, but as a tool to spur hotels to reopen. We would like to reopen fully, but the business is simply not there. In 2019, a record 66.6 million visitors came to our amazing city. In April, NYC & Company predicted that we’ll see 36 million visitors by the end of 2021 — nearly half of 2019′s record. So far for 2021, foot traffic in Times Square has been 44% below its 2019 levels. As a result, at hotels with 100 rooms or more — the very hotels this bill targets — more than 26,000 rooms across the city are closed, according to the Hotel Association of NYC.

 

Even though it’s billed as a law to help workers, this law will likely force hotels like mine to close, leading to thousands of workers losing their jobs permanently. This bill is forcing us to make the financial decision to sell our properties rather than lose more and more money every day waiting for tourists to come back so we can reopen. City Hall must know that. Yet politicians went for the quick headline instead, making it look like they punished us on behalf of working people. Now, as this bill has gone into effect, Smith Travel Research — a private source for hotel industry metrics — reported that New York’s revenue per room saw the largest drop across the country in October compared to 2019 revenues.

 

The bill was rushed through under the least democratic circumstances. Less than a month after it was proposed, it sailed through Council to face a “public hearing” with the mayor. The public hearing was the industry’s chance to let City Hall know that this bill would do more harm than good. Instead, the mayor was 30 minutes late and heard only two testimonies virtually — not letting anyone from our industry attend the public hearing or even enter City Hall — before signing the bill with an indoor rally.

 

If the Severance Law is not struck down by the courts, then we need the next mayor and Council to step up and overturn this law with all urgency. The future of New York’s tourism industry — and our city’s economy — depend on it.

 

Krakowski is president of Skyline Hotel.