In the aftermath of President Donald Trump’s proposed tariffs, New York City’s hotel industry anticipated a decline in visitor numbers. However, to their surprise, tourist arrivals remained relatively stable, resulting in high hotel occupancy rates and increased revenue.
In June, hotel occupancy in New York City reached 88.8%, a significant contrast to the national average of 68.5%. This figure reflects a minor 0.4% increase from 2024 but still showcases growth that many in the industry did not foresee. The plea from the hotel sector for the city to lower its taxes came in response to anticipated drops in visitors stemming from the tariffs.
Moreover, revenue per available room surged by 5% year-over-year, hitting $295.55, according to preliminary data from STR. Average daily rates also saw a notable increase of 4.6%, reaching $332.92.
Despite these positive indicators, occupancy rates have not yet returned to pre-pandemic levels, largely due to a drop in international visitor numbers. According to CBRE’s first-quarter hotel report, international travel to the U.S. decreased by 11.6% year-over-year in March. Specifically, visitors from Canada saw a substantial decrease of 19% in the first half of the year, contributing to an overall decline of 3.4% in international travelers.
Due to these falling numbers, New York City Tourism + Conventions recently revised its visitor forecast for 2025 downward by 17%. However, amidst the decline in international leisure travel, business travel has stepped in to bridge the gap, as noted by Jared White, managing director of Quadrum Global.
White reported that, particularly in New York City, corporate travel has compensated for the shortfall in international leisure tourism, suggesting a dynamic shift in travel patterns.
While the current outlook remains robust, there are fears regarding how political factors—including tariffs and potential changes in immigration policy—could influence tourism as the year progresses. Investors remain cautious, noting, “There is some softness, but it’s not really that remarkable.”
Nevertheless, hotel owners face impending challenges beyond fluctuations in tourism. An existing agreement with the Hotel and Gaming Trades Council is set to expire in July, raising concerns among owners and analysts regarding potential labor cost increases. According to STR, labor costs account for 41.8% of hotel revenue in New York City, making labor negotiations especially critical.
The expiration of the labor agreement coincides with the highly anticipated FIFA World Cup final in 2026 at the Meadowlands, a timing that could give unions increased leverage in negotiations. Jan Freitag, Senior Vice President of Lodging Insights at STR Global, emphasized the historical difficulty of achieving profitability in a unionized environment.
Looking further down the line, the future supply of hotel rooms in New York City remains constrained. A 2021 regulation mandating special permits for new hotel constructions has resulted in limited projects moving forward. However, 8,000 hotel rooms, which began construction prior to the regulation, are expected to open; approximately 75% of these projects should be completed by the year’s end.
Additionally, around 16,000 hotel rooms previously utilized as migrant shelters are seeing changes. While 6,000 of these rooms will stay as shelters, 900 have already been restored as hotel accommodations. Projects to convert many of the remaining rooms into permanent housing are also underway.
The air of uncertainty surrounding the hotel market is driving up underwriting costs for investors, raising concerns about financial forecasts. The recent Democratic primary victory of Zohran Mamdani for mayor has introduced additional uncertainty into the regulatory landscape, causing at least one investor to withdraw from a $300 million hotel deal.
As Anudeep Gosal, a senior director of Besen Partners’ hotel advisory group, explained, this uncertainty raises questions about New York’s future regulatory environment, making investors more risk-averse. “It’s all speculation, but it has put a question mark. And uncertainty means more conservative capital.”
In conclusion, while New York City’s hotel sector has defied dire predictions for tourism following the implementation of tariffs, significant challenges loom on the horizon that could impact both the industry’s profitability and overall market stability.
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