Recently enacted regulations and just introduced legislation on New York City hotels risk undermining the industry’s ability to adapt, innovate, and contribute fully to the city’s economic rebound, causing harm to its vital tourism sector.
The COVID-19 pandemic dealt a severe blow to the city’s hotels, with occupancy rates and revenues plummeting. As the sector continues to face headwinds and profitability pressure, it now faces a barrage of newly proposed mandates and bureaucratic red tape that threatens not only current performance but its future growth and vitality.
One of the most concerning developments is a new City Council bill requiring hotels to obtain an annual license. This abruptly introduced legislation, with no advance consultation or notice to the industry, would impose stringent operational mandates, including arbitrary and onerous staffing requirements that would create a rigid, one-size-fits-all approach that fails to account for the diverse needs of the city’s nearly 700 unique budget, boutique, limited-service, and luxury hotels — and would severely damage the scores of small businesses that serve them.
The bill poses grave risks to the industry; leading to potential foreclosures, bankruptcies, and closures of hotels citywide. Hotels would be forced to raise rates to stay viable, which will ripple through the restaurant, theater, convention and events sectors, and many other businesses that rely on a vibrant tourism market. The net result will be the loss of tens of thousands of jobs and billions of dollars to the New York City economy.
Outsourced food and beverage outlets operating inside NYC hotels will also be at risk under this bill. These businesses operate on exceedingly small margins of profitability and cannot withstand these new burdens.
Critics have rightly characterized this bill as a “nuclear bomb” and a “hotel industry killer.”
In an industry already grappling with high interest rates, financing challenges, inflation and persistent workforce shortages, such ill-conceived and unvetted regulations could prove catastrophic for many establishments, particularly smaller, independent hotels.
This regulatory reality, combined with high construction costs and financing constraints, has effectively halted new hotel openings, with precious few additions to the city’s hotel stock in 2023.
Securing financing for future renovations and growth will be virtually impossible. Lenders and other capital providers will be hesitant to take the risk of providing long-term financing for properties subject to an annual and arbitrary re-licensing process. As a result, the overall quality of the New York hotel market will suffer.
This will further ripple through the restaurant, theater, and other businesses that rely on tourism. The net result will be the loss of tens of thousands of jobs and billions of dollars to the city economy and a severe reduction of income, occupancy, and sales taxes to the city’s coffers.
In short, everyone loses.
As the city seeks to rebuild its tourism sector and attract both domestic and international visitors, it needs a thriving, competitive hotel market that can serve its guests, local residents and employees.
Regulators must strike a balance between addressing legitimate concerns and allowing hotels the flexibility to operate efficiently and competitively. Rather than imposing blanket mandates, a more collaborative approach involving industry stakeholders could lead to more effective, tailored solutions that address specific issues without hobbling future growth and innovation.
The hotel industry in New York and across the U.S. is strongly committed to the safety of guests and employees and to ensuring cleanliness standards. The industry is also committed to raising employee awareness in the effort to prevent human trafficking. Industry-wide initiatives developed and advanced by the American Hotel & Lodging Association, such as the Five Star Promise, Safe Stay and No Room for Trafficking, have been created and implemented to underscore this commitment.
New York’s iconic hotel industry is a proud part of the city’s cultural, real estate and economic history. The industry has demonstrated remarkable resilience in the face of numerous challenges. However, the current spate of increasing regulatory burdens threatens its future position as a strong contributor to the city’s economy.
We urge city policymakers to reassess their approach and work towards creating a regulatory environment that fosters growth, encourages investment, and allows the hotel industry to create outstanding experiences for its guests, opportunities for employees, returns for its investors and economic benefits for the local economy.
Carey is the interim president and CEO of the American Hotel & Lodging Association.
