The Real Deal: “Paying the severance would have cost more”: New law pushes hotels to reopen

The Real Deal: “Paying the severance would have cost more”: New law pushes hotels to reopen

October 25, 2021 6:37 PM


Depending on whom you ask, a new law requiring hotels to reopen by Nov. 1 or pay severance to out-of-work employees either achieved its intended results or claimed its first victims.


The Omni Berkshire Place, a 399-room Midtown hotel that opened in 1926 but has been closed since June of last year, plans to welcome back guests before the November cut-off, according to Crain’s.


“Our strategy was to lose less, so what do we do?” Peter Strebel, president of Dallas-based Omni Hotels & Resorts, told the publication. “Paying the severance would have cost more than reopening.”


The legislation requires hotels that either closed or laid off 75 percent of their staff during the pandemic provide $500 per week in severance pay to service employees for up to 30 weeks. Hotels can exempt themselves from the mandate by recalling at least 25 percent of employees by Oct. 11 and reopening by Nov. 1.


While closed, the Omni Berkshire Place at 21 East 52nd Street costs $6 million per year to operate, including mortgage and property taxes, Strebel said, adding that without pressure from the legislation, the hotel would have eventually reopened as occupancy rates slowly increase across the city. For now, Strebel said he’s hoping to break even.


Other hotels, such as the 1,300-room Grand Hyatt near Grand Central and the 1,900 room Hilton Midtown on Sixth Avenue, also announced plans to reopen shortly after the bill’s passage.


The bill, which was signed by Mayor Bill de Blasio earlier this month, has received pushback from the hotel industry. The Hotel Association of New York City sued the city just days later in an attempt to strike down the legislation.


The association claimed that the legislation violates state and federal laws and punishes already struggling hotels. The new law was pushed by the hotel workers union, which supported the mayor’s short-lived campaign for president.


The city’s hotel industry is also fighting a proposed amendment that would require special permits for new hotel construction citywide. The zoning text amendment, also supported by the union, was approved by the de Blasio-controlled City Planning Commission last week and next heads to the City Council for a vote.