New York’s brutalized hotel market still faces many hurdles

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Travel restrictions and a slow return to the office are hitting New York’s hotel market hard, just as the city hits what would normally be peak tourist season.

Courtesy of John Fitzpatrick

Fitzpatrick Grand Central

“You’re just walking on water,” said John Fitzpatrick, who owns and operates Fitzpatrick Manhattan and Fitzpatrick Grand Central.

The 155-room Fitzpatrick Grand Central on East 44th Street has remained open during the coronavirus pandemic. The Fitzpatrick Manhattan, a 150-room hotel located at 687 Lexington Ave., was closed throughout the pandemic but reopened in May. It is now operating at around 65% occupancy on weekdays, and it could reach up to 80% on weekends. That’s really not enough for a boutique hotel, said Fitzpatrick – the occupancy rate has to be over 90%.

“What is really killing us isn’t international travel, we really need it; this helps you increase your occupancy rate and also allows you to get a better rate.

Of course, the industry as a whole faces enormous challenges. Revenue per available room increased by more than 100% between the second quarters of 2020 and 2021 to reach $ 95.65, according to PwC’s Manhattan Lodging Index. However, comparing the current rates to those before the pandemic tells a different story; in the first half of this year, the RevPAR is still down 65% compared to the same period of 2019.

“We tend to around 60% [occupancy] right now, which isn’t even a clear indicator of the real issues, as it doesn’t represent an almost 45% drop in income, as it’s not just the occupancy rate – it’s the rate that’s horrible right now, ”said Vijay Dandapani, CEO of the New York Hotel Association.

The PwC report says that the Delta Variant’s hindrance to New York office reopens also leaves a question mark hanging in the second half of this year.

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Courtesy of Vijay Dandapani

Vijay Dandapani, CEO of the Hotel Association of New York City, and his wife, Kamini, on a trip to Pakistan

A large number of hotels closed temporarily at the start of the pandemic for more than a year, and some have closed permanently, including the Roosevelt, the W Hotel Downtown and the Maxwell Hotel. However, in May of this year, many hotels were preparing to reopen after more than a year, including the Plaza, Mandarin Oriental New York, and Ritz-Carlton New York. Restrictions such as mask warrants and capacity caps have been replaced with vaccination requirements, and New York City has launched a $ 30 million marketing blitz to attract people to the city.

But while companies have delayed their return to the office amid lingering concerns about the virus, business travel has still not returned to levels the hospitality industry relies on. Two-thirds of companies have pushed back their Labor Day return dates to the fourth quarter or 2022, according to a survey of 238 executives in late August by human resources consulting firm Gartner.

Additionally, ongoing US travel bans to places like the UK and Europe continue to upset the industry.

“These are an example where federal policy makes no sense, absolutely no sense,” Dandapani said. “It is very difficult to restore the status quo as international travel is still not allowed.”

In the first quarter of 2021, air traffic levels in New York City fell 66% year-on-year, according to PwC citing data from the New York and New Jersey port authorities.

International traffic fell about 77% during the quarter. A total of 8.6 million passengers passed through Newark Liberty International Airport, LaGuardia International Airport and John F. Kennedy International Airport in the first quarter, down 16.8 million from the previous year.

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Courtesy of Loews Hotels

Loews Regency New York

The slow numbers have meant that some have delayed the opening altogether. Brenda Correa, general manager of Iberostar 70 Park Avenue, a 205-room hotel closed since March of last year, said bisnow in April, the hotel was planning a reopening on July 1. But without strong international tourism demand, operators have opted for a wait-and-see policy and have kept the hotel closed for the time being.

“We are best known as an international brand rather than for the domestic market… We are trying to open before the end of the year,” she said on Wednesday. “I hope November, crossing my fingers. “

At present, the hotel operates with around 12 people, but normally more than 70 people work there.

Glimmers of hope are there. Broadway began to reopen this week, with shows like Hamilton, The Lion King, Bad and Chicago now visible to people who have been vaccinated and wearing masks. Schools in New York City have reopened for in-person classes, which is seen as a boon to the city’s takeover and reopening.

Fitzpatrick said it was impossible to make money with hotel occupancy rates below 70%, but he expects that once the restrictions are lifted demand will increase massively.

“We think there would be a huge increase once it opens because people have been [here] during two years.”

Loews Regency New York reopened in May after being closed for 13 months and is operating well, according to general manager John Maibach. The hotel at 540 Park Ave. has 379 rooms, and Maibach said bisnow in April, staff were monitoring website traffic and future bookings to give them the certainty they need to reopen. The results so far have been excellent, he said in an interview last week.

“It was a quiet first week. But since then, it’s been much better than we expected. Granted, far from pre-pandemic levels, but the volume of business we’ve had from mid-May until today far exceeds what we thought it would be when we forecasted before. reopening, ”he said, adding that over the Labor Day weekend, the hotel operated at over 80% occupancy.

There is little business travel, but midweek travelers are arriving, there has been an increase in long-term stays, and people are making bulk reservations for weddings that have been canceled throughout. pandemic, Maibach said.

People are also coming back for elective surgeries that have been canceled at the worst of the pandemic. In total, the Loews Regency has had three sold-out nights since it reopened. And without international travelers, what Maibach calls the “drive market” – people coming to New York from within a walkable radius – fills the void.

“We are not disappointed with our position today,” he said.

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