As thousands of migrants began arriving in New York City in late 2022, city officials began scrambling to find places to house them. They quickly found a home: hotels, which were still struggling to recover from the pandemic-induced drop in tourism.
Dozens of hotels, from once-grand establishments to humble establishments, closed their doors to tourists and began signing multimillion-dollar contracts with the city to house migrants exclusively. The humanitarian crisis provided an unexpected lifeline for New York's hotel industry, as hotels became safe havens for tens of thousands of asylum seekers.
Two years on, the migrant crisis is helping to dramatically change New York's hotel industry as the city's peak tourist season approaches. While hotel room supply has plummeted as hotels have been converted into shelters, tourist demand is near pre-pandemic levels and is expected to hit an all-time high.
Migrant shelters, along with other factors like inflation, a decline in short-term Airbnb rentals and a projected decline in new hotel construction, are pushing the nightly rate for the average room to record levels.
According to CoStar, a leading provider of commercial real estate data and analytics, the average nightly room rate for New York City hotels is set to rise 8.5% to $301.61 in 2023, up from $277.92 in 2022. For the first three months of 2024, when prices typically decline, the average room rate is 6.7% higher than the same period last year, at $230.79 a night, up from $216.38 in 2023.
Approx. 135 Of the city's roughly 680 hotels, most are concentrated in traditional tourist hotspots like Midtown Manhattan, Long Island City in Queens and near Kennedy International Airport. Participating hotels will receive up to $185 per room per night, the city said. None have returned to traditional hotels.
Midtown hotels include the four-star Row NYC Hotel in the heart of the Theater District and the century-old Roosevelt Hotel near Grand Central.
According to data compiled by CoStar, a leading provider of commercial real estate data and analytics, the use of the city's hotels by migrants will result in a reduction of 16,532 hotel rooms, leaving 121,677 hotel rooms available for tourists.
That's 2,812 fewer hotel rooms than there were just before the pandemic, exacerbating the shortage.
“During peak times, try to book a hotel in Midtown Manhattan for Tuesday, Wednesday or Thursday nights. If you can get a room, you may end up paying a lot more,” says Daniel H. Lesser, co-founder of LW Hospitality Advisors. “It's all about supply and demand, and immigrant rooms are reducing supply.”
About 65,000 migrants are being sheltered in hotels, tent dormitories and other shelters, largely because the city is legally required to provide beds to anyone who needs them, and it expects to spend $10 billion over three years on the migrant crisis.
Starting in late 2022, the city will sign a contract with a hotel industry group worth up to $980 million to pay hotels that decide to shelter migrants under the “Sanctuary Hotel Program.” According to city officials, hotels will receive $139 to $185 per room per night, regardless of whether the rooms are available, guaranteeing them a steady stream of revenue. (These fees do not include money the city is spending on meals and other services for migrants; there have been reports that hotels have been paid more than $185 per night.)
Many of the hotels converted into shelters were heavily in debt, facing foreclosure, or had poor customer reviews, but they catered to budget and middle-class travelers. While many were independent, about half were branded properties such as Courtyard, Holiday Inn Express, SpringHill Suites, or Super 8.
Mid-priced tourists are likely to see the steepest price increases because immigrants mostly fill the city's more affordable hotel rooms, said Sean Hennessy, a hotel industry adviser and clinical associate professor at New York University.
“I really believe this measure has allowed two-star, two-and-a-half-star hotels to be a little more courageous and take advantage of the situation and charge prices they probably wouldn't have been able to charge otherwise,” he said.
Other factors have also contributed to higher room rates, including policies supported by Mayor Eric Adams and his predecessor, Bill de Blasio.
In September, city officials began enforcing a new law aimed at curbing the proliferation of short-term rentals like those listed on Airbnb, which once accounted for more than 10% of all tourist accommodation in the city. The crackdown has led to the disappearance of most short-term Airbnb rentals, a phenomenon some observers say may have had a bigger impact on hotel rates than the migrant crisis.
According to AirDNA, an independent company that collects data on short-term rentals, the number of Airbnb listings in New York City for short-term stays of less than 30 days plummeted 83% from 22,247 in August 2023, the month before the law went into effect, to 3,705 in March 2024. Most of the remaining Airbnb listings in the city, about 90%, are only available for stays of 30 days or more.
The legislation, Local Law 18, was vigorously supported by the hotel industry and hotel workers unions, allies of Mayor Adams. Analysts say it's not surprising that the decline of short-term rentals has led to increased demand for hotel rooms, prompting some hoteliers to raise prices.
“It was expected,” said Jamie Lane, chief economist at AirDNA, “which is why the hotel industry was pushing for this law to be passed, to charge higher rates and make hotels more profitable.” (Supporters of the law argue that short-term rentals are exacerbating the city's housing shortage.)
New construction may not help: More than 8,000 hotel rooms are currently under construction, but that number is expected to drop significantly in the long term, analysts and developers say, as new zoning rules and special permits backed by influential hotel unions limit hotel development and raise the costs of building and operating them.
A spokesman for Adams, a Democrat, said in a statement that the higher hotel rates were due to an increase in tourism, not the mayor's policies. About 62.2 million people visited the city last year, slightly below the previous record of 66.6 million in 2019.
“The return of tourists to New York City is reflected in hotels, who are seeing increased demand,” the statement said. “New York City is safer and cleaner, and as the numbers show, it remains one of the most popular tourist destinations in the United States.”
Hotel occupancy last year was 81.7%, up significantly from a low of 46.7% in 2020 but not as high as 2019, when occupancy was 86.2%, according to the New York City Hotel Association, an industry group.
Hotels serving as shelters are spread across the five boroughs, ranging from a 76-room Sleep Inn in the Bronx to a 93-room Staten Island Inn. City officials have noted that 32 hotels are housing migrants and about 6,000 homeless New Yorkers.
There are notable clusters: More than two dozen hotels in the Jamaica neighborhood of Queens and near Kennedy International Airport, and another 19 hotels in and around Long Island City, Queens' fast-growing waterfront.
There are 22 hotels concentrated in the tourist area of ​​Midtown Manhattan, near Times Square, Grand Central Station, beside the Empire State Building, and the Theater District.
In fact, the four largest hotels housing immigrants (totaling more than 3,500 rooms) are located in the heart of Midtown. These large hotels are mostly old buildings that were dilapidated or struggling. The immigration crisis appears to have reversed their fortunes or temporarily saved them.
In October 2022, the Row NYC hotel in Times Square, which opened in 1928 as the Hotel Lincoln but ran into financial difficulties during the pandemic, became the first and largest hotel to be converted into a shelter. The hotel had an initial $40 million contract with the city to house thousands of migrants in 1,331 rooms for $190 a night. (In the months before it opened as a shelter, room rates reportedly ranged from $300 to $500.)
The Roosevelt on East 45th Street, named after Theodore Roosevelt, has also emerged as a symbol of the humanitarian crisis. Owned by Pakistan's national airline, the hotel closed in 2020 during the pandemic but struck a deal with the city to reopen in May 2023. Its once-grand lobby is now the main processing center for migrants. Thousands of migrants live in the 1,025 rooms on the upper floors.
Hotels that house migrants are required to provide daily trash collection, alternate day housekeeping and fresh towels and sheets at least once a week, according to hotel contracts reviewed by The Times.
The contract with the New York City Hotel Association, which runs through Aug. 31 and is up for renewal, allows the city to spend up to $980 million, but that doesn't necessarily mean spending, city officials and industry leaders said. The amount could change depending on migration patterns and how long the crisis lasts.
“We have clearly communicated to hotels participating in the program that if the migrant situation improves, their contracts can be terminated with one month's notice,” said Vijay Dandapani, president and CEO of the hotel association.
Dandapani stressed that the association does not profit from the city contract but acts as a negotiator between the city and the hotel, but declined to say how much the city has paid the hotel so far.
Hotels that decide to reopen to tourists must carry out costly renovations to repair the wear and tear caused by operating as shelters, and some have said they will close permanently when their shelter contracts end.
“Some of them may not come back to the hotel industry,” Dandapani said. “That's it.”