Throughout the COVID-19 pandemic, New York City’s hotels have navigated one hurdle after the next, and with the holiday season upon us, few are expecting the challenges to end anytime soon.
“Everyone is in the same boat, however some of us are managing to ride the rapids better than others,” said Mujo Perezic, general manager of The Kimberly Hotel in Midtown Manhattan. “We have to remember that many hotels have not yet reopened and some never will, so the level of challenge varies from one hotel to the next.”
Fortunately, visitor numbers are trending upward, and while things aren’t quite what they used to be pre-pandemic for both tourist and leisure travel, New York City’s $5 billion tourism industry has been buoyed by a number of major developments, including the return of Broadway shows in September and the reopening of borders to international visitors in November.
Anchoring a sense of optimism and excitement across the local hospitality market is the crucial holiday season, which—barring any new restrictions surrounding the spread of the omicron variant—is shaping up nicely, much to the surprise of some hotel operators.
“It’s remarkable how the environment has evolved throughout the year,” said Mitchell Hochberg, president of Lightstone, a real-estate investor and developer whose portfolio includes three New York properties: Moxy Times Square, Moxy Chelsea and Moxy East Village. “Back when we were locked up at home in January, if you had told me all of our New York City hotels would be 100% occupied throughout the month of December, I would not have believed you.”
A make or break season for the hospitality industry
As with pre-COVID times, the 2021 holiday season is proving to be the most anticipated time of the fiscal calendar, with hotels hoping a successful December will make up for earlier losses in the year.
“The fourth quarter overall is the most crucial for the hotel,” explained Pradeep Raman, general manager of the Baccarat Hotel, which sits across from the Museum of Modern Art in Midtown. “We expect to be full pretty much through all of December, and for the Christmas holiday we will be busier than we historically have been.”
Commonly heard among hoteliers are stories of travelers eager to make up for lost time while reuniting with family or experiencing the holidays in New York.
“We draw visitors in from everywhere no matter the season, but this winter will be one for the books,” said Hochberg, who is opening Moxy Hotels next year in Williamsburg and the Lower East Side. “People haven’t been able to celebrate in Manhattan for the ball drop in over two years, or go to Broadway shows, and now they can again.”
NYC & Company, the city’s marketing, tourism, and partnership organization, projects around 36 million international and domestic visitors for 2021—down from 66.6 million in 2019, but an improvement from 22.3 million in 2020. The city is heavily investing in this recovery and promoting inbound visitors through different market promotions and travel campaigns. Domestic travel is expected to return almost to pre-pandemic levels by 2023, but the outlook for business travel remains softer, with most industry data pointing to 2024 or later for a full recovery.
Figures provided by the Hotel Association of New York City demonstrate just how damaging the pandemic has been on the local hotel industry. NYC hotel occupancy for 2020 ended at 46.8% compared to 86.3% for 2019; the average room rate for 2020 was $151 compared to $254 for 2019. The association expects total occupancy numbers for 2021 to come in around 55%, with an average room rate around $175.
“We don’t expect a return to pre-pandemic levels until 2025, as conferences and conventions have a long horizon for booking,” said Vijay Dandapani, president and CEO of the hotel association, which represents nearly 300 hotels with more than 80,000 rooms and approximately 50,000 employees. “Furthermore, business travel is at about 25% of pre-pandemic levels, and very few corporations are permitting travel.”
The struggle to return NYC’s hotel industry to its pre-COVID glory
Beyond the owners and stakeholders anxiously waiting for occupancy numbers to rebound to pre-pandemic levels, there are industry players such as hotelAVE, a consultancy made up of former hotel owners, operators, and financial professionals that provides asset management and advisory services to lenders and owners of hospitality assets.
According to hotelAVE, the pandemic caused the permanent closure of more than 12,000 hotel rooms in Manhattan, and it’s anticipated that at least 20% of the NYC hotel supply will close permanently due to COVID, mostly in the upscale and luxury segments.
“Despite the pandemic, New York has re-emerged to become the destination it used to be pre-pandemic for both tourism and leisure travel,” said hotelAVE Vice President Silvie Cohen. “This fall, NYC started to see more market compression which has allowed properties to yield rates and drive revenue.”
The Langham, New York, Fifth Avenue, is an example of a well-established hotel that saw a dramatic shift in the balance of its clientele during the pandemic.
“Our business model changed quite drastically over the last 18 months—we went from being a hotel that enjoyed a 60/40 split between business travelers and leisure travelers to being 80/20, with leisure travelers leading the pack,” said Richard Bussiere, the hotel’s managing director. “We were practically the only luxury hotel to stay open throughout the pandemic, so we had no choice but to keep things going.”
The Langham went from a standard of 70%-80% occupancy, with an emphasis on business travelers due to its central Midtown location, to as low as 1%-5% at the very start of the pandemic. The hotel used that period to beta test cleaning and safety protocols, created staycation offerings, and developed new partnerships with local attractions.
“At the moment, we are routinely enjoying very high occupancies thanks to the holiday season and the return of international travelers to New York City. Our anticipation for success in 2022 is very high, as we are starting to see the return of both groups and business travelers,” Bussiere said. “Judging by how quickly the international audience started to visit our website and make booking inquiries, we are confident that New York City is indeed back as a destination for travelers from Europe, Canada, South and Central America and Australia and the Pacific. There does seem to be a prevailing feeling of security among travelers based on the city’s vaccination rates and overall safety as a destination.”
The Crowne Plaza HY36 Midtown reopened in April after a 13-month closure due to the pandemic. After a slow return, the hotel experienced a spike in visitation during the summer months as attractions welcomed guests and outdoor dining emerged as the new normal. September saw ComicCon and Broadway return, and in light of a successful fourth quarter—booked solid over Thanksgiving week, Christmas week, and New Year’s Eve—the hotel is now anticipating its 2022 occupancy to be level with 2019 numbers.
“One thing we have learned through the pandemic is how to quickly pivot, whether it be changing market segmentation to repurposing the physical space in the building. I think hotels will continue to adapt their growth strategies based on industry conditions,” said John Beck, the hotel’s general manager.
The hotel industry hasn’t been immune to the staffing issues that have plagued businesses across the city, forcing operators to take a creative approach to retaining current employees while also hiring new staff.
“Hotels have seen success offering different retention incentives as well as hiring bonuses,” said hotelAVE’s Cohen. “There are also other non-monetary ways to motivate employees, such as providing school supplies for employees’ children, which we have seen go a long way.”
Perezic of The Kimberly Hotel is among those who are proceeding with caution heading into the near year.
“2022 is promising, but the first quarter in this business is always tough,” he said. “So we will have to see what curveballs are thrown at us: what will the weather be like; will other variants threaten cancellations?”
Mirroring those concerns is Hochberg, of Lightstone.
“We’re not out of ‘pandemic times’ just yet. Business travel across our hotels has tripled this month from the previous month, accelerating ahead of our expectations for the year. It’s hard to assess whether that persists into 2022, but we are encouraged to see a wider variety of companies booking beyond just our top accounts,” he said. “And while international travel has shown new signs of life since the reopening of borders, the list of restricted countries is lengthy and there is still global hesitancy around return to travel.”
Still, despite the myriad challenges, hotel owners and operators are excited for the industry outlook moving into 2022.
“As a rule, New York City sees a lull in visitors in January and February but we are hopeful that, due to the pent-up demand of travelers who weren’t able to visit New York earlier in the year, that might be a bit different in 2022, and the rest of the year is firming up to be strong as well,” said The Langham’s Bussiere.