Hot Summer Is Cold Comfort For NYC Hotel Investors

In the weeks after President Donald Trump rolled out his proposed tariffs, New York City’s hotel sector braced in anticipation of a drop in visitor numbers. But that dip never happened. 

Visitors are still coming to the city in similar numbers to last year, filling up the city's hotels and pushing revenue to new highs. But even so, investors are eyeing obstacles that they fear could grow larger for owners in the near future, from a labor agreement expiring and fresh supply about to hit the market to the city’s future political leadership.

“It's not super positive,” Anudeep Gosal, a senior director of Besen Partners’ hotel advisory group, said of investor sentiment. “Everyone's at an absolute standstill.”

Preliminary STR data for June shared with Bisnow shows that NYC’s hotel occupancy hit 88.8% last month, compared to 68.5% nationally. That's just a 0.4% increase from 2024, but it’s still growth — something that the hotel industry wasn’t anticipating in April when it asked the city to lower its taxes as it predicted a dip in visitors in retaliation for tariffs. 

Revenue per available room was also up by 5% compared to June 2024, hitting $295.55, STR’s preliminary data shows. Average daily rates also increased by 4.6%, reaching $332.92.

Occupancy is still below prepandemic levels, in part due to a decline in foreign tourists coming to the U.S. The number of international travelers fell by 11.6% year-over-year in March, according to CBRE’s first-quarter hotel report.

The number of visitors from Canada plummeted by 19% in the first half of the year, according to data from the U.S. Travel Association reported by CNBC. The drop was enough to bring the overall number of international travelers down by 3.4%.

New York City Tourism + Conventions recently cut its 2025 forecast for visitor numbers by 17% for the year, CNN reported.

But where international traveler numbers are falling short of the hotel industry’s hopes, business travel is making up for the loss, said Jared White, managing director of investment firm Quadrum Global, which owns four Arlo-branded hotels in Manhattan and Brooklyn.

“In New York, at least, the softness that there is in international leisure we've made up for, and some, in corporate,” he said.

It’s still too early to say how political factors — like tariffs, trade wars and fears over aggressive border control at airports — might affect tourists’ travel plans later on in the year, he said, although current projections look strong.

“There is some softness, but it's not really that remarkable,” he said. 

There are more speed bumps ahead for hotel owners besides a potential drop in tourism. Next July, an existing agreement with the Hotel and Gaming Trades Council is set to expire, leaving owners and analysts fearing that a new agreement will bump up labor costs significantly. 

“The demand and the revenue are not the question. The question is, what falls to the bottom line?” STR Global Senior Vice President of Lodging Insights Jan Freitag said.

He said the expiration lands just before the Meadowlands hosts the final of the 2026 FIFA World Cup, adding leverage for the labor unions. Labor costs eat up 41.8% of hotels' revenue in New York City, according to an STR report.

“If you're in a union environment, traditionally, it has been very, very hard to make money,” Freitag said.

There is little supply in the pipeline longer term because of a 2021 rule requiring all new hotel constructions to get special permits. But there still are 8,000 rooms that started construction before permit requirements kicked in, around 75% of which are expected to open before the end of this year. 

There are also the 16,000 rooms that were taken offline when the city used hotels as migrant shelters. While around 6,000 of those will remain shelters, according to STR data, 900 have already become hotel rooms again. Many of the remaining rooms will return to the hotel market, while thousands are already planned to be converted to housing.

But the uncertainty is driving up the costs that investors have to underwrite, Gosal said. Another factor adding to the uncertainty is Zohran Mamdani’s victory in the Democratic primary for mayor last month, which one hotel investor said led to him backing out of a $300M hotel deal.

“It has put a question mark on, what is the regulatory environment of New York going to look like?” Gosal said. “It's all speculation, but it has put a question mark. And uncertainty means more conservative capital.”