The year 2020 may be over, but the pains of the coronavirus pandemic that have ravaged the hotel industry in New York are not gone.
Bisnow / Kelsey Neubauer
The iconic Plaza Hotel on Fifth Avenue, one of many hotels to be temporarily closed amid the coronavirus pandemic.
Even with the start of nationwide vaccine distribution, business travelers – the bread and butter of the industry – are unlikely to return in large numbers this year. Tourism is not expected to rebound until April at the earliest. Even when these major hospitality drivers start to recover, it will be years before the market likely hits pre-pandemic levels.
“The current headlines are all about vaccines, which is obviously positive,” said Jan Freitag, senior vice president of STR, who is responsible for hosting for North America. “But we are certainly not out of the woods yet.”
With 58% of the city’s hotel rooms temporarily closed, according to PwC, the sector has been largely on hiatus since the coronavirus gripped the city last March. Even though less than half of New York’s hotel rooms were open, occupancy was just over 47% between January and November, down almost 45% from 2019, according to STR .
About 20% of hotel rooms in New York could close permanently, The Wall Street Journal reported last year. Already, hotels like the W Hotel at 8 Albany St. and the Maxwell Hotel at 541 Lexington Ave. have closed their doors for good. Earlier this week, Sunstone Hotel Investors returned its 478-unit hotel, the Hilton Times Square, to its lender after announcing it would not reopen, The Real Deal reported.
Hotel employment, which accounts for 9% of the city’s overall employment, fell 82% in 2020, from 18,840 employees in March to just 3,329 in September, according to a December report by the Association of New York hotels. With business travel and conferences coming to a close, frontline and essential workers have replaced business travelers and tourists as the main customers of New York City hotels.
While 2021 is likely to be more successful than 2020, it will kick off abruptly. As a case of coronavirus around the world to achieve records, Revenue per available room, average daily rate and occupancy will likely be worse at the start of 2021 than at the end of last year, Freitag said.
Revenue per available room, an indicator of the health of the industry, declined 66% from 2019 to 2020. Freitag predicted that NYC’s RevPAR will increase by 50% this year compared to last year, but it wouldn’t. not close to making up for the losses of 2020.
The W Hotel at 8 Albany St. in downtown Manhattan, which has closed for good.
New York’s hospitality industry is like a four-legged stool, said Vijay Dandapani, president and CEO of HANYC. It draws on a quartet of guest types: tourists, business travelers, conference attendees, and those who come for conventions.
Tourism is expected to grow along with the number of vaccinations. In late spring and early summer, these numbers are expected tick, according to a study by the city’s tourism partnership, New York City & Co., which forecasts 38.2 million tourists this year, a far cry from the 66.6 million tourists who visited the Big Apple in 2019.
“If the summer of 2020 has taught us anything, [it] is that the average American is looking to get back on the road, ”Freitag said.
Business travel will also be slow, he said. It’s unclear when people will feel comfortable getting together again and if working remotely will have a long-term effect on this part of the recovery. HANYC expects business travel to return only in the third quarter.
“The bar to put someone on a plane [for business travel] is suddenly much higher, ”Freitag said. “Leisure travel will lead this recovery … [but] group travel needs to recover for the hotel industry to recover. ”
Large, nationwide corporate events, typically scheduled years in advance, are expected at slowly start small regional gatherings in the second half of 2020, according to the meeting news analysis and research firm Meetings and Conventions.
New York’s largest convention center, the Jacob K. Javits Center, which hosts nearly 175 trade events in a normal year, has no event his calendar until the end of April, with just nine events planned for the whole of 2021.
“There were hotels in New York that were built because of the arrival of business in Javits,” said Allie Hope, director of development for Virgin Hotels. “The lack of demand will therefore have an impact.”
Since leisure travel will be the first to return, some hospitality sectors will likely outperform others, Hope said. There will be consolidation, strategic partnerships and “the cream will rise to the top,” she said.
Hotels that typically derive the majority of their business from tourists, especially domestic travelers, are likely to be the first to return, said Rani Gharbie, head of acquisitions and development for Pod Hotels, which targets young tourists.
Ultimately, a significant recovery for the industry will occur when people feel safe, a time variable that remains the biggest unknown. Many hotels will not make it up to this point. The operators who survive will be those who are well capitalized and “can make deals with the city and with the lenders” until demand starts to pick up, Dandapani said.
“Everyone saw that 2021 was finally stronger than expected,” Hope said. “Planning [for the next steps] happens in real time. ”