NY Hoteliers Celebrate Recent Upturn, But Cautious of Potential Downturn

Hotel owners in New York City are rejoicing over the progress made in the past year since the pandemic began, yet they are wary of the potential for an economic downturn that could put a damper on their celebrations.

Urban hotels in cities such as New York were among the first to feel the effects of the Covid-19 pandemic, as travelers opted for warmer climates instead of crowded cities and business travel plummeted.

Hotel owners and industry analysts have reported that New York hotels are beginning to experience a resurgence. During the 2022 holiday season, leisure travelers drove up room rates in New York to levels higher than before the pandemic, even though occupancy rates remain lower. According to STR, a hotel data-and-analytics firm, revenue per available room was higher than 2019 for three out of five weeks after Thanksgiving.

The second half of the year saw an increase in group and business travel, and hotel owners are reporting strong bookings for 2023. Although the total number of rooms sold in New York hotels as of December 24th was 16% lower than in 2019, according to STR, the demand for these hotels has still improved this year.

Richard Born, the owner of BD Hotels which has two-dozen properties in the city, stated that things appear to be alright from his perspective. However, he is concerned that leisure demand could decrease and economic and political issues could affect future travel plans, so he added that everyone is being cautious.

Hoteliers are being cautious for a variety of reasons that go beyond the economy and job losses. An increase in interest rates is reducing the profits of those with floating-rate debt. Inflation is causing Americans to have less money to spend on leisure activities like traveling. The war in Ukraine and a strong dollar are making it more difficult and costly for Europeans to come to the U.S. Additionally, travelers from China, which has recently reopened, must pass Covid-19 tests in order to enter the country.

The hotel industry in New York is in a much better place than it was this time last year, when the Omicron variant caused a lot of cancellations during the early months of 2022 and dashed expectations for the holiday season. Some proprietors have reported that their business is doing very well now.

Mitchell Hochberg, the president of Lightstone, a real-estate company, and the proprietor of four Moxy brand hotels owned by Marriott International Inc., declared that worries about Covid-19 have largely disappeared in 2021.

Lightstone has removed the option for customers to reschedule events due to outbreaks from their event contracts. This year, many financial, entertainment and technology companies have booked holiday parties that involve renting out the entire space at Moxy restaurants, clubs and rooftop bars. The rooms for New Year's Eve are being sold at a 50% higher rate than in 2019.

Mr. Hochberg reported that the portfolio had experienced its most successful two-week period ever during the holiday season.

Business travel has been slower than before the pandemic, but it is beginning to pick up. Corporate guests from the finance and technology sectors are reserving rooms a month or two ahead of time, according to Mr. Hochberg, and there is no indication of a decrease in bookings despite the economic difficulties both industries are facing.

The Mark Hotel on the Upper East Side had its most successful year in terms of revenue in 2022, despite occupancy being lower than in 2019. Owner Izak Senbahar noted that his customers, which include people from the fashion, film, business, and European travel industries, have not been deterred by the increasing prices since the pandemic. The Mark's average daily rate in 2022 was the highest it has ever been, reaching $1,900.

Mr. Senbahar remarked that it had been an exceptional year.

Historically, foreign visits have been a major part of the city's tourism industry, but they have yet to fully recover. According to ForwardKeys, a travel-analytics company, international flight bookings to New York in November were 77% of what they were before the pandemic, and are projected to be 18% lower than in 2019 by the end of December. Domestic air travel to the city, however, is close to its pre-pandemic levels.

According to Mr. Senbahar, the Mark's occupancy rate of 65% this year is due to the gradual return of luxury international travelers, but he anticipates that these visitors will be back in the next two years.

He remarked that although it is possible to stay in one's backyard for a year or two, eventually the longing for New York will set in.