Before the deadly COVID-19 virus hit New York last March, our city was arguably the hotel capital of the United States. Both of my hotels, the Fitzpatricks, were booked out for months. I had 155 full-time employees.
Now, a year later, one of my hotels is temporarily closed and there is no telling when I will be able to reopen it. My other hotel was open due to the pandemic runs on almost empty. Only 20 percent of our rooms are fully booked – and that on a good day. I can only employ less than a fifth of my staff.
It’s devastating. Not just for my family hotels, but for hundreds like mine across town.
The hotel industry employed more than 50,000 New Yorkers, raised $ 3.2 billion in tax revenue annually, and added $ 22 billion in total economic benefits annually. Currently only 20 percent of hotel employees are employed. I’ve tried to keep so many Employee busy as long as possible, but the loss of income made that almost impossible.
The end of the pandemic may be in sight as vaccinations become readily available, but it could be years before our economy and hospitality industry fully return – if ever they do.
That’s why we need the city to act quickly.
There are two immediate avenues the mayor and city council can help our industry recover faster, get tens of thousands of men and women back to work, boost tourism and put the hospitality industry on a firmer footing.
One way would be to address the disproportionate property tax burden on hotels compared to other Class 4 businesses such as office buildings, factories and stores. The other would be to set review rates that overload hotels.
Before COVID, property taxes consumed 15 percent of a hotel’s revenue. That burden is now even greater as the pandemic is causing hotel revenues to drop by 80 percent. The weighted average of property taxes as a percentage of operating income increased 182 percent between 2008 and 2018, compared to just 24 percent for office buildings.
As a result, many hotels were unable to pay taxes due on July 1st and January 1st. They have little or no cash flow and unpaid tax charges are a staggering 18 percent. The city must declare an amnesty for the property taxes of the hotel so that the shuttered hotels can be reopened and those standing on the water can survive.
It should also level the playing field by having reviews more fairly reflect the current value of these hotels. The city should freeze the assessment and tax rates for a short time and then determine the assessment system. In this regard, it should be noted that the city’s tax commission has fallen hopelessly behind and is unable to cope with the growing number of valuation challenges.
The measures we propose would represent a down payment for the recovery not only of the hotel industry, but of the entire tourism and hospitality industry. The more hotels the city can keep open, the more visitors will come to New York – to spend money and enjoy Broadway plays and world-class restaurants, increase the number of full-time positions, and generate more tax revenue for the City Hall coffers.
I was here during September 11th – a time that was perhaps the most turbulent for New Yorkers. Neither of us knew what was going to happen next or when tourists would feel safe to return to our great city. But we teamed up and with the help of the government, we recovered.
Now, almost 20 years later, if we miss this moment, hotels will close, our tourism will continue to fluctuate, tens of thousands of workers will be unemployed and large parts of the city will fall into disrepair.
We can not permit that.
John Fitzpatrick is the owner of the Fitzpatrick Hotel Group New York.
