About 100 city hotels were forced closed their doors because of the pandemic, and those who survived are now pushing for devastating property taxes to be cut, according to an industry group.
Hotels began bouncing back in early December as the COVID-era travel restrictions began to lift, but much-needed recovery hit a wall when the Omicron variant emerged and New York COVID cases soared.
Hotels now struggle to stay afloat with crippled vacancy rates struggling with the Big Apple’s property taxes, which have risen 100% since 2008 and are twice as high as in other major cities, a study found.
“The industry has really been hit and it’s not going to be pleasant in the first quarter,” said Vijay Dandapani, president of the Hotel Association of New York City, on the rise in Omicron-powered COVID cases, adding, “At the same time, we are” being penalized . “
Hotels pay city property taxes that devour 9.4% of their revenues, according to a new report by global hotel consultant HVS, which was created for the association.
That’s double what the industry needs to stay afloat, and almost double the 4.5% taxes that major US cities like Washington and Los Angeles put on their hotels, the study found. Atlanta hotels only pay 2.29% of their sales.
Of the increase in hotel property taxes, 25 to 30% of the increase went under the administration of de Blasio.
Vijay Dandapani, President and CEO of the Hotel Association of New York City, said, “The first quarter will not be pleasant.”Monica Schipper / Getty Images for Hotel Association of New York City (HANYC)
And the wave of hotel closings isn’t over yet: another half-dozen have reportedly filed for bankruptcy, like The Williamsburg, or in some cases like the Standard High Line, foreclosed.
Other city costs tend to be higher as well. Furniture replacement accounts for 44.3% of the Big Apple’s hotel budgets, but only 36.5% elsewhere.
And if large hotels with 100 or more rooms that have closed due to the pandemic don’t open by November 1st, a new city law requires owners to make heavy payments of $ 500 per week to employees for 30 weeks, even if they had already given their workers severance pay.
“Our industry was struck,” said Dandipani. “We have lost 85% of sales for 2020 and are now at 50% of the occupancy compared to 2019.”
The Williamsburg Hotel has reportedly filed for bankruptcy.Ed Reeve / View Pictures / Universal Images Group via Getty Images
Before the pandemic, from January to October 2019, hotels had a solid occupancy of 86% and revenue per room known as RevPar of $ 213.
As a result of the lockdowns, the occupancy dropped to just 49% by October 31, 2020 and the RevPar to just $ 76.
In 2021, the occupancy rate was 57% through October with a RevPar of $ 108, and those that reopened in November when international travel resumed saw even better numbers, with the occupancy rising to 72% and the RevPar hit $ 185.
This month was a bright spot, with an 81% occupancy rate through December 11 and a RevPar of $ 274 – until COVID-19 cases increased.
“December is decent, but there is still a long way to go before normalcy,” noted Dandipani.
The standard hotel on the High Line will be sealed off.Roy Rochlin / Getty Images
City bylaws require hotel property tax to be based on income and expenditure, but Dandipani complained that the city’s Treasury Department “has its own formula … that bears little resemblance to the decline in revenue”.
Although sales declined more than 65% in 2020, billable taxes only decreased 21% for 2020/2021, according to Dandipani.
“This resulted in tax bills that were punitive,” said Dandipani.
1,000 hotels paid over $ 1.05 billion in property taxes to the city for fiscal years 2019 and 2020, and it was billed $ 841 million in property tax for the fiscal year ended June 2022, he said.
As of June 2020, 61 hotels owed $ 7.1 million in property taxes, compared to 56 hotels that owed $ 4 million in 2019. The finance department did not provide data on payment defaults for 2021.
