NYC’s catastrophic hotel crisis isn’t ending anytime soon

6 months ago 100

A blessed ending is successful show to the Big Apple’s edifice manufacture catastrophe — conscionable hold until 2026!

“I americium supremely optimistic for 5 years from now,” said Vijay Dandapani, president of the Hotel Association of New York. But the short- and medium-term outlooks are different story.

“The cardinal happening is that planetary question is not present yet” and there’s nary mode to cognize erstwhile it volition afloat return, contempt President Biden’s program to trim restrictions by immoderate clip successful November, Dandapani said.

The beleaguered industry’s plight is epic successful scope. Of the city’s full 700 hotels pre-pandemic, astir 250 either closed oregon were converted to stateless shelters.

Average occupancy fell from implicit 80% successful 2019 to 33% aboriginal this twelvemonth (it has since upticked to 45%, Dandapani said). By comparison, occupancy ne'er fell beneath 60% during the earlier crises of 9/11 and the 2008 Wall Street crash.

Room rates person fallen 60% since 2019. A further looming shadiness implicit the concern is simply a flood of caller rooms — perchance much than 18,000 — successful projects that were started anterior to 2020 and are connected way to unfastened this twelvemonth oregon soon after, including astatine specified marquee-branded properties arsenic the Virgin Hotel, Ritz-Carlton Nomad, the Arlo Midtown and Hard Rock adjacent Times Square.

TheGrand Hyatt Hotel astatine  42 Street astatine  Grand Central Station successful  Manhattan, NY.Lockdown: Room rates person fallen 60% since 2019 and what was erstwhile a shuttered Grand Hyatt (above) is being reborn arsenic a Hyatt Grand. James Messerschmidt for NY Post

International concern travelers and tourists coming to the city, who walk overmuch much than home visitors do, peaked astatine 13.5 cardinal successful 2019, plunged to a specified 2.4 cardinal successful 2020 (mostly successful January and February) and mightiness modestly rally to 4.6 cardinal this year, according to NYC and Company, the city’s selling organization.

Even that uptick depends connected the details and timing of the eased introduction restrictions. “We don’t spot concern coming backmost to 2019 levels until 2025,” Dandapani said.

The city’s hotels were nether strain adjacent earlier COVID-19 staggered the industry, owed successful ample portion to over-construction that raised the fig of rooms from 85,000 a fewer years earlier to 125,000.

“I americium supremely optimistic for 5 years from now. The cardinal happening is that planetary question is not present yet.”

Vijay Dandapani, president of the Hotel Association of New York

Hotels besides took a beating from mostly amerciable short-term-stay facilities that “cannibalized the manufacture without having to wage structural costs,” Dandapani said — specified arsenic a 100% summation successful hotel-specific spot taxes from 2008 to 2019.

In airy of truthful galore grim trends, a highly contentious measure present successful the City Council that would severely bounds caller edifice operation by requiring a peculiar licence for each caller task seems astir beside the constituent — astatine slightest for now.

The union-backed connection was condemned by manufacture advocates who feared it would crook a edifice surplus into a shortage. But that was earlier the coronavirus reared its head.
“It doesn’t substance due to the fact that there’s nary concern close now,” Dandapani said. “It’s been projected that the connection to bounds development, if it becomes law, mightiness effect successful a shortage by 2030, but projections 9 years retired are questionable.”

For each the challenges, determination are whispers of optimism successful the cooler autumn air. Two of the city’s largest inns are back: the New York Hilton connected Sixth Avenue reopened aft 18 acheronian months and the Grand Hyatt connected East 42nd St. returns connected Nov. 1 arsenic the Hyatt Grand Central New York.

A factual reflection of longer-term religion successful the marketplace is that edifice values person bounced backmost from an alarming slump past year.

Exterior of the Royalton Hotel astatine  44 West 44th Street. The Royalton edifice astatine 44 West 44th Street sold for 24% little than it traded for successful 2017.James Messerschmidt for NY Post

The Royalton connected West 44th Street sold for $42 cardinal successful September 2020 — oregon 24% little than what it had past traded for successful 2017. That sparked fears of a escaped autumn successful values.

But past month’s merchantability of the Cambria Times Square connected West 46th Street mightiness beryllium a happier portent. The 198-room spot fetched $88.5 million, oregon astir $452,000 per country — lone somewhat little than its valuation earlier past year’s lockdown, according to an manufacture root who didn’t privation to beryllium named.

Exterior of the Hub Times Square. The Cambria Hotel sold for $89 cardinal and is present the Hub Times Square North.James Messerschmidt for NY Post

CBRE elder vice-president Brad Burwell, who specializes successful edifice investment-sales, commented, “Over the past six to 8 months, the worth of edifice assets successful the metropolis person returned to near-2019 values.”

He said the “discount to pre-pandemic levels was significant” anterior to past spring, “in excess of 25 percent. That discount present has each but gone away.”

“Investors are taking semipermanent views owed to respective factors,” helium added. “Starting successful May, the fig of groups consenting to bash deals expanded rapidly. People felt safer astir buying” arsenic COVID restrictions were eased, for 1 thing. People saw restaurants unfastened indoors again. Broadway was coming back.”

Even though afloat betterment mightiness hold until 2024 oregon 2025, “deals could beryllium underwritten much clearly,” Burwell said.