We’ve observed that the hospitality market in NYC continues to demonstrate signs of recovery, particularly in the Midtown Manhattan and Tribeca submarkets that typically attract high numbers of hotel guests. We observed that CoStar, a leading resource on hospitality data, raised its Revenue per Available Room (“RevPAR”) projections in their Village/Soho/Tribeca submarket reports. The reports pulled on 2/29/24 and 3/6/24 had projections change from 6.0% to 11.1% for 2024 and 2.5% to 6.4% for 2025, respectively.
So what’s causing this improvement in projections?
New York City's Local Law 18 led to a de facto ban on short-term rentals such as Airbnb and Vrbo in September 2023. It’s projected that roughly 70% of STR listings will be removed from the available stock, equivalent to roughly 107 hotels closing. According to this report by JLL shared with HotelDive, the surrounding hotel inventory may absorb much of this demand, which could lead to a $380.4 million revenue boost in 2024. We view this as the primary short-term driver in Costar’s revised outlook, but it’s not the only factor at play.
New hotel development in NYC has been affected due to a special permit requirement since 2021, according to CoStar. This has resulted in a sparse upcoming supply. High construction and labor costs are also adding supply constraints to the pipeline. Based on recent (03/20/24) construction data from CoStar, the NYC market currently has approximately 8,800 rooms under construction, but only 1,200 are in final planning which suggests to us that fewer projects will be built in the upcoming years.
In November 2023, around 140 hotels in New York were used to house over 170,700 migrants to help with the humanitarian crisis. The closures are distributed through the greater NYC market. While this has temporarily reduced the supply of hotel rooms and potentially taken some hotels offline indefinitely, it may also affect room rates and revenue growth going forward.
Bottom Line: We believe the current reductions in supply and reduced competition in the region going forward may bode well for NYC’s hotel revenue.
To stay updated on the latest at CrowdStreet, follow us on LinkedIn here. To read more educational pieces, access more on our Resource Center here.
Figure 1: CoStar’s Map of Village/Soho/Tribeca Submarkets for Hospitality.
Map Source: Submarkets, CoStar, March 12th, 2024.
Figure 2: Village/Soho/Tribeca, Hospitality Submarket Report - Report pulled on 2/29/2024
Source: Village/Soho/Tribeca, Hospitality Submarket Report, CoStar.
Figure 3: Village/Soho/Tribeca, Hospitality Submarket Report - Report pulled on 3/6/2024
Source: Village/Soho/Tribeca, Hospitality Submarket Report, CoStar.
Disclosure: This article was written by an employee of CrowdStreet, Inc. (“CrowdStreet”) and has been prepared solely for informational purposes. Nothing herein should be construed as an offer, recommendation, or solicitation to buy or sell any security or investment product issued by CrowdStreet or otherwise. This article is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any investor. All investing involves risk, including the possible loss of money you invest, and past performance does not guarantee future performance. All investors should consider such factors in consultation with a professional advisor of their choosing when deciding if an investment is appropriate. CrowdStreet’s review process of an issuer, deal, investment type or strategy, market, or other investment criteria should not be construed as a recommendation or a solicitation to buy. All investors should consider their individual factors in consultation with a professional advisor when deciding if an investment is appropriate.