Tourists are back to NYC in big numbers

This article was originally published on Sep 5 5:00am EDT by THE CITY

In Times Square, the world mecca once again teeming with tourists, the opening of a Van Leeuwen Ice Cream store this month marked a milestone. The area lost 179 businesses during the pandemic. The ice cream outlet is the 180th to open since then.

Tourists are back in New York, with visitors fueling record attendance at the U.S. Open tennis tournament in Queens. Jobs in hotels and restaurants are up almost 10% in the last year. Occupancy at hotels has also jumped from last year and room rates have increased to prices above pre-pandemic levels, partly because the thousands of rooms the city government is renting out to house asylum seekers are squeezing supply.

But the city will not surpass its 2019 record of 66.6 million visitors because once-numerous travelers from China remain few and far between and Americans are flocking to Europe in unprecedented numbers. 

Investors remain unconvinced of the future, with hotels selling at steep discounts from what they commanded before the pandemic.

“We have all these headwinds,” says Vijay Dandapani, president of the New York Hotel Association.

Still, the numbers show a rebound with the official forecast from the tourism agency NYC & Co. still predicting 63.3 million visitors this year, up 12% from last year. So far this year, hotel occupancy has averaged 87.5% of capacity, according to STR, the primary source for data on hotels nationwide. The numbers for Times Square are even more robust, with occupancy nearing 90% for some weeks in August.

Times Square pedestrian traffic topped 400,000 on some days compared with an average of 365,000 in 2019. With office workers still coming in only a few days a week, those tourists have been crucial to a retail rebound. The Times Square Alliance says spending this quarter will be 92% of the pre-pandemic number.

“I think people from the region are rediscovering Times Square,” said Alliance President Tom Harris. “People are coming for long weekends.”

Hotel room rates are up more than would be justified by the increase in occupancy, with the average so far this year $270 a night compared with $246 last year. The reason, says Dandapani, is “rate compression.”

Hotel industry experts say the city has contracted as many as 10,000 hotel rooms for migrants, although the mayor’s press office would not confirm the number.  

While most of the migrant hotels are among the lowest priced and least desirable, they do squeeze supply, allowing other hotels to raise rates.

“If you run a luxury hotel it’s like hitting the Lotto,” he added.

The association has even convinced STR to remove several thousand rooms from its calculations of occupancy and room rates because they are being used for asylum seekers.

Surpassing the 2019 tourism record may depend on the state of U.S.-China relations, since the Biden administration’s efforts to restrict Chinese access to advanced technology has impacted travel to New York. Flights between China and the U.S. are only 10% of pre-pandemic level, group travel has not resumed and individuals have long waits for visas to enter the United States.

In 2019, the 1.1 million China visitors ranked second among international travelers, behind only Canada, and spent almost $3,000 per trip — double that of other international tourists.

Chinese group travel segment is the “missing piece,” New York City Tourism and Conventions president Fred Dixon told the trade publication Skift. (The city tourism bureau declined an interview request from THE CITY.)

One uncertainty is the arrival of new rules Tuesday that will essentially make Airbnb illegal in the city without the presence of the person who owns or rents the residence. The move is expected to largely curb Airbnb and similar platforms as options for travelers.

It remains to be seen whether former Airbnb users will rent hotels or cancel plans to visit.

While city tourism executives and city officials remain optimistic, investors have doubts about the future. The Sheraton New York Times Square, the third largest hotel in the city with almost 1,800 rooms, sold last year for $346 million, less than half the $738 million it sold for in 2006.

With interest rates having more than doubled in the last year, hotels needing to refinance will be especially vulnerable.

“The capital markets are more unfriendly than even during COVID,” said Dandapani. “You will see more sales at depressed prices.”

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