New York Daily News: OPINION: What New York’s hotels need now
By Vijay Dandapani, president and CEO of the Hotel Association of New York City
June 17, 2021
Mark Twain’s famous quip that rumors of his death were greatly exaggerated is as apropos to post-pandemic New York City as it was in the aftermath of the 1970s’ fiscal crisis. As before, the naysayers will surely be proven wrong with many preliminary indicators already demonstrating a forceful comeback in key sectors such as technology and finance.
An upswing in fortunes will also hold true for one of New York City’s oldest employers, the hotel industry — and thankfully so. It’s almost inconceivable to imagine a thriving New York City without its hotels in full swing. From historic Grande Dames to modern boutiques, so much of the romance and mystique of New York is intertwined with hotels, which serve as ambassadors to visitors from all over the world.
More significantly, with nearly $15 billion in 2019 revenues contributing to more than $3.5 billion in taxes to the Big Apple’s coffers, the industry directly employed nearly 55,000 workers prior to the pandemic. However, nearly all of that including employment for a substantial majority of the workers vanished during the last nine months of 2020.
Within a day of the COVID shutdown last March, hotel occupancy plummeted to single digits. Room rates in 2020 plunged more than $100 compared to the previous year. More tellingly, RevPar (revenue per available room), the industry’s primary metric that gauges capacity utilization in dollar terms, fell by 70% compared to 2019. This financial tsunami hit owners and employees alike with more than 40,000 workers furloughed. Many operators teetered on the edge of bankruptcy with others surviving thanks to generous forbearance terms from lenders. All told, some 250 of the city’s hotels have shuttered with over 50 closing their doors permanently.
Thankfully, the city’s COVID travails, for the most part, appear to be in the rearview mirror with some key pillars of its civic life, most notably Broadway, returning with a bang over the next few months. The sensational announcement of performances starting this month and the prospect of a grand concert in Central Park this fall proposed by Mayor de Blasio will bring much-needed hope, life and revenue to the city. Further, the world’s biggest tennis tournament, the United States Open, is expected to welcome live spectators and it is hoped the United Nations General Assembly will also reconvene in person this fall.
These events, however, do not herald an instant revival of the hotel industry. That’s because the industry’s main revenue drivers: business travel, conventions and trade shows as well as conferences remain moribund. Fact is, there will be no V-shaped recovery (in revenue terms) for the industry. To the contrary, consensus forecasts from those who track the industry point to 2025 as the year when pricing will return to pre-pandemic rates.
Some may understandably ask what’s different about the hotel industry’s plight as compared to, say, airlines or retail that it merits more attention. A key differentiator is the industry’s unique ability to offer a sustainable pathway to the middle-class through good-paying jobs (with full health-care benefits) that have no particular educational requirement in a city that will remain a very expensive place to live. Yet, despite our considerable employment footprint, the hotel industry was not a beneficiary of direct federal stimulus other than limited relief for payroll for employees on the job. Consider that some 70% of hotel workers remain laid off.
It’s also worth mentioning that, despite the economic devastation caused by COVID, the Hotel Association and its member hotels stepped up to the plate in the city’s hour of crisis to shelter frontline health workers and homeless throughout the pandemic with many hotels continuing to shoulder this civic burden with alacrity. That said, most hotel owners and operators are eager to return to their core mission of providing fine lodging catered to transient visitors as business begins to come back.
As they have been throughout its history, hotels — as both an employer and economic driver — will continue to be an essential thread in the fabric of New York City. But right now that thread needs mending. Mayor de Blasio’s three-month repeal of the hotel occupancy tax is a good start, but it should be extended through the end of the year. Property tax relief should also be a part of the discussion to fend off further bankruptcies and encourage shuttered hotels to reopen. These relief efforts will be critical to hotels’ and the city’s recovery in the long run as we once again prove the naysayers wrong.
Dandapani is president and CEO of the Hotel Association of New York City.