• What the Short-Term Rental Rule and Congestion Tolls Mean for NYC Hoteliers   

Excerpt from CoStar

Stakeholders Say the City Is Recovering, Though It's Early to Determine Effect of New Policies

A new wave of laws and social issues is creating a hospitality landscape in New York City that is different from any other major market.

The factors include legislation that severely tightens restrictions on short-term rentals, zoning changes that hamper hotel development and a migrant crisis that has taken thousands of rooms off the market. The latest change is the first congestion pricing plan in the country that is set to impose fees for those driving into Manhattan south of 60th Street.

Meanwhile, and perhaps partly because of these factors, the New York City's hotels are doing well. Zach Demuth, global head of hotels research for JLL, said the market continues to see strong demand. NYC's hotel occupancy is inching toward a full post-pandemic recovery driven by the return of international travel — mainly from Europe, but with some demand trickling in from China — as well as persistent strength in domestic leisure and business travel.

New York City expects to see strengthening group travel over the coming months, Demuth said. This will likely benefit hotels in the immediate vicinity of Jacob Javits Center as well as those in neighboring submarkets and possibly New Jersey, given the broader lodging supply constraints stemming from migrant shelters and lack of short-term rental listings.

Brian McSherry, chief operating officer for M&R Hotel Management — which has 17 hotels in the greater New York area — said rates at the company’s properties were in the first quarter were about $50 higher than in recent years. He added 2023 was “a great year,” and 2024 “is looking even better,” driven by leisure business.

Daniel Lesser, co-founder, president and CEO of LW Hospitality Advisors, a consultancy in New York, said it’s hard to draw a direct line from the short-term rental situation to hotel demand, but there is no question the market is “rebounding very nicely.” For existing hotel owners, the forces at play can add up to a great opportunity. However, Lesser said there is an argument to be made that the city needs more hotel rooms or eventually demand will suffer due to high costs and limited inventory.

The restrictions on Airbnb have been significant in M&R Hospitality Management's hotels capturing higher rates, McSherry said. He added the restrictions have been a net positive because short-term rental operators do not have to comply with many of the municipal regulations that hotels do.

Vijay Dandapani, CEO of the Hotel Association of New York City, said that Airbnb has been “spreading the canard” that the short-term rental law is driving higher rates. The actual reason, he said, is the inventory being used by migrants.

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