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De Blasio's Plan To Stunt Hotel Development Would Cost City $7B, Analysis Finds

A room at the Ace Hotel New York City.

Mayor Bill De Blasio's administration has released a plan to force hotel builders to get New York City Council approval for new properties, and if enacted, it could freeze development and wipe some $7B from the city’s tax revenue over the next decade and a half.

That analysis comes from city budget officials, who wrote in a confidential report viewed by The New York Times that the tax losses could reach $350M in the next four years. The figure could balloon to $7B by 2035 and ultimately leave the city with a hotel room shortage, city officials estimated in the report, initially put together in February.

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

De Blasio’s plan, which would require the city council to greenlight any new hotel development, first emerged in 2019. That kind of approval is only necessary for major new developments like airports and large stadiums, but the mayor argues imposing requirements on hotels will protect organized labor and communities.

The Hotel Trades Council supported the measure and backed de Blasio’s short-lived presidential campaign — though officials said back in 2019 the concept was already in the works before HTC announced it would back his campaign.

A spokesperson for the mayor told the Times that implementing the special permits won’t negatively impact tourism or ban hotel development. Still, analysis suggests if the permits are introduced, the city would be short 5,000 rooms by the time tourism numbers recover to their 2019 levels. 

The plan is now being presented to communities, but its critics argue it will slow the city’s economic recovery after the coronavirus pandemic. Further, they argue any shortage of hotels will deter badly needed visitors and drive them to Airbnb or cheaper options in the Tri-State area.

As of last week, there were 116 hotels still temporarily closed in New York City, according to lodging research firm STR. Six have officially shut forever. Some 144 have reopened after closing at some point in the crisis, a number that is slowly growing each day as the city returns to normality.

But hoteliers have told Bisnow their situation remains precarious, as tourism remains sluggish. In the second week of this month, open hotels in New York City were on average just over 50% occupied with revenue per available room at $75, per STR. But when including the 116 hotels still not taking guests, occupancy is closer to just 30% and RevPAR just under $50. By comparison, in the same week of 2019, RevPAR was at $216.