New York City Plans To Cap Hotel Rooms, Make It More Expensive To Visit

New York City is expected to approve rules that would prevent opening new hotels. Specifically the City Council would have to approve new projects. In limited neighborhoods where this has been in place since the Bloomberg administration, no hotel project has started.

This will mean fewer hotel rooms in the city, higher room rates, and fewer visitors as a result. It will therefore mean less tax revenue (not just hotel taxes, but also sales taxes and income taxes from businesses serving out of towners). It will mean less business for Broadway, for restaurants, for taxi cabs that have struggled in the face of Uber and Lyft.

Even the city’s own experts think this is insane,

And in an internal memo obtained by The Times, the city’s top planning official warned that a more limited proposal — requiring a special permit for hotels in the Union Square area of Manhattan — could hamper the hospitality industry, without a viable urban planning rationale.

“We flag that to continue with this proposal could be seen as contrary to economic recovery principles and sound planning,” Marisa Lago, the director of the planning department, wrote last year in the memo to City Hall.

So why is this on the verge of happening? It benefits both incumbent hotel owners and hotel unions by shutting out competition.

  • Limiting competition will make existing hotels more profitable, and unions can demand better wages from hotels that lose more money if shut down by a strike.

  • Fewer hotels mean fewer hotel jobs yet unions still support this because newer hotels are generally non-union, at least initially.

The New York Times points out that Mayor de Blasio was endorsed by the hotel workers union in his delusional campaign to become the Democratic nominee for President last year, they spent heavily on ads for him, and this is payback on his way out the door.

Limiting development of hotels in New York City is bad for the U.S. as an international tourist destination. It’s bad for the city as a world financial center. And it exacerbates the fiscal problems of a city that’s already driving away the residents it relies on for tax revenue, putting itself in a position where it will have to try to squeeze those same residents for even more revenue. De Blasio will be gone, of course, so won’t face electoral consequences for the damage done.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. New Yorkers are a major contributor to domestic and international travel.

    Fewer hotels means more condos and apartments. Which means New Yorkers can live slightly more cheaply. Which means they have more money for travel.

    So this will increase travel.

  2. I disagree. There are PLENTY of hotels in NYC. This is not a measure to prevent new ones from being built. It simply says the City Council will now approve them going forward. The lack of oversight (with a look towards increased city revenue) is partly the reason why the number of hotels is so out of control. Granted, I would not be surprised if the current hotels are behind this push (to quash new competition), but consumer wise, it’s not bad. NYC is way over built and it needs to be checked.

  3. @David the proposed change would apply to zoning districts that cannot be developed as residential today so this is not simply a choice of hotel vs future residential. I would like to see both more housing for New Yorkers and more hotels too.

  4. Ask any city how rental controls work.

    Prices go up, the rich are happy to pay, and the working class suffer.

    Less construction jobs.
    Less jobs in general.
    Higher prices

    That’s how price controls work, always.

  5. Someday, this may mean that I stay in a hotel near Newark Airport, Newark Penn Station or Jersey City. Terrible.

  6. I’d love to travel more the NYC, but I have found myself doing more travel to places like Toronto, Boston, Chicago, Seattle, where I can get much more value for a city/entertainment experience. NY has become more of a hassle than anything, but maybe capping things will help.

    When I do travel to NYC for work (few times per year), I often optimize my trips to minimize nights in Manhattan. Thoughtfully planned, I’ve saved big $$$ employing this strategy.

    While NYC is at it, they should capacity constrain vehicles in the midtown area, as well … issue resident permits, capacity manage car services, or similar. Will be interesting to see how things play out.

  7. Jersey City would be happy about this, just one subway station to Manhattan.
    And PATH is way cleaner than disgusting New York City subway.

    Other boros? Screw them!

    JFK is next to Nassau, not even far.

  8. This is quite the conservative stance coming from Gary. I applaud the analysis

  9. And they want to kill Airbnb, to further limit competition for well-connected hotel owners.

    Not to mention get rid of Uber, to protect taxi medallions.

  10. NYC is a wasteland. As a lifelong NYC resident, it’s un-salvageable. I no longer care because I know the demographics of NYC condemn it to being a dump. There’s no point in worrying about the future here. Any business or commercial opportunity will be 1000 miles away for me. Family ties and inertia keep me here for the next year. But it is no place to raise a family. There no point in opening a business here with the draconian regulations and tax structure, although, it seems Indians and Chinese don’t have to adhere to any of these rules and are given a pass on the tough standards whites are held to.

  11. Cry me a river. There’s plenty of hotel inventory in NYC. Especially now. If there’s ever a space crunch, it will be addressed when needed.
    All that vacant retail and office space is something that REALLY needs addressing.
    I bet smart money is probably is already on the case.

  12. History repeats itself. In the 70s liberal judges and supposed criminal justice experts refused to prosecute criminals and gave very light sentences even to repeat offenders they did prosecute. The theory was it was society’s fault people commit crime. Same liberal mindset regulated and taxed everything. NYC and many other urban areas were open sewers of filth and crime. People finally had enough and elected people who toughened up prosecution and sentencing, rolled back regulation and at least tried to hold back tax increases. Cities revitalized and boomed. Now we are back with defund the police and regulations. I certainly don’t have any desire to visit NYC, Minneapolis, Seattle, Portland, San Francisco, and others. I have zero desire to return to any of them.

  13. Really? More expensive???

    Last time we stayed in a NYC hotel pre-covid we had to take a second mortgage on the house to pay for that room!!!

  14. Hotels were starting default on their lender payments before the pandemic even started. There was a glut of hotels. Obviously politicians in NYC are engaging in a power grab and will have their hands out for anyone who wants to build a hotel in NYC (not to mention the unions wanting to force hotels to use union workers), but the reality is that there are too many hotels in NY as it is. They move into communities and more often than they should end up becoming homeless shelters or flop houses bringing in all sorts of undesirables into the neighborhood. On top of that housing is as expensive as heck in NYC. Don’t really see why people should have extra long commutes to work because hotel owners buying up property pricing them out of the neighborhood. Some sort of check on developers snatching up tons of property in NYC is appropriate, I just think the city is giving itself too much power but lets not act like the current situation is viable.

  15. Almost as stupid as the Airbnb regulations.

    Some of us remember a time where you could not find a decent hotel in NYC except at absurd rates. Over time the increase in hotel rooms and Airbnb has brought more affordable rates to Manhattan as well as wider variety of properties at every price point plus more chains where you can use points.

    This law basically hurts people who can’t afford sky high hotels but maybe that’s what the elites want. Only the wealthy will be allowed to visit and play in Manhattan.

  16. Long term it can be negative if in place for that long – but short to mid term – NYC had a glut of hotel supply coming online ahead of the pandemic. Rates were on the decline so the negative aspect of this may take a while to come into play.

  17. What a wonderful idea. After all, everyone complains that New York is too cheap and this will fix that.

  18. At least pre-pandemic, did condos and apartments in the area provide anywhere close to the amount of recurring tax revenue for the city’s coffers that would come to the city as a result of commercial activity (including tourism-related activity)? I was under the impression that these neighborhoods popular for hotels in the city tended to have less resident-based tax revenue than commercial activity-related tax revenue.

    I doubt that this restriction on new hotels has any meaningful benefit for those who want to buy or rent residential property in NYC. If anything it may actually even drag down the quality of life fore people who are already owners or occupants of residential property in NYC; for there comes a point where increased residential density in an area can cause problems for pre-existing and/or new residents too.

  19. Are there too many hotels in NYC ? I don’t know, but I do know that there are way too many totally crappy dumps that have been around forever!
    Maybe aspiring new entrants could buy an existing dump and do a top to bottom renovation, thereby increasing the supply of quality NYC hotels.

  20. “Jackson Waterson” is looking for a welcoming neo-KKK chapter in Florida that will accept him and his fellow traveler (and Trump worshipper) Stephen Miller?

  21. GUWonder,

    Labeling reasonable people you disagree with as KKK reduces the stigma associated with that group.
    Just like your kind made “racist” into a general-purpose and largely meaningless insult (Did you know milk and hiking were both racist??) branding anybody, no matter how factual or reasonable, with some other label, reduces the string negative connotation of that label. For shame.

  22. Jimmy North,

    Thanks for your crocodile tears.

    Jackson Waterson is a “white supremacist” character.

    Calling out racist dog whistlers as fellow travelers with the KKK is calling a spade a spade and doesn’t change the nature of the spade.

  23. As a former resident of both NYC and San Francisco, I can say my last visits to these two cities have made me appreciate the happy fortune of having relocated to a more tolerant and tax friendly environment.

    This may very well increase the cost of a hotel room in NYC, which is unfortunate for those less affluent. But maybe it will spur them to visit more affordable areas instead.

  24. There are so many great places to visit across the country.

    High tax places and places with more restrictive development conditions aren’t the only places that can be great to visit.

    If the price to visit NYC becomes “too high”, there are alternatives. Seek them out, use that consumer power.

    At this point, the price to visit NYC is pretty low. It wasn’t even all that high right before the pandemic. It seemed like NYC was relatively more expensive to visit during various points during the crooked Mayor Giuliani years and Mayor Bloomberg years than it has been during the current clown Mayorship.

  25. The economic assumption behind “fewer hotels means higher hotel fees” is without context or reference to the current supply and demand. Your conclusion assumes demand currently meets or exceeds supply and that demand will continue to grow — requiring more supply to meet that demand. If supply greatly exceeds demand — which is surely the case now — then a limit on new hotel construction — or basic city planning to locate certain commercial uses in certain locations — will not raise hotel prices. Nor will excess supply lower prices below the cost to provide a hotel room. At best, excess supply may mean destructive competition for a short time, but is not sustainable. See Texas office construction during the S&L fraud of the 1980s.

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