NYC Hotel Industry Revenues Surge by Billions Following Airbnb Ban and Supply Constraints

New York City's hospitality sector has experienced a significant financial uplift, with hotel revenues increasing by billions, a development linked to recent policy decisions that have constrained the supply of available accommodations. These policies include stringent regulations on short-term rentals, a de facto ban on new hotel construction, and the utilization of hotel rooms for migrant housing. Commentator Josh Barro recently highlighted these factors, stating, "> NYC banned construction of new hotels, largely banned Airbnb, and filled up tens of thousands of hotel rooms with illegal immigrants instead of tourists. Policy choices to make hotel rooms scarce are bad for theater."

A recent study revealed that New York City's hotel industry saw an increase of approximately $2.1 to $2.9 billion in total revenue over the first eighteen months following the implementation of strict short-term rental regulations. This surge coincided with an increase in average daily hotel prices by roughly $14 to $19 per night. Local Law 18, enacted in January 2022 and effective September 2023, drastically limited short-term rentals, leading to an 85% reduction in Airbnb listings by September 2024, according to Gothamist.

Further contributing to the scarcity, a "citywide hotel special permit" passed in December 2021 has effectively halted new hotel construction. This policy requires new hotel developments to undergo a lengthy land use review process, often necessitating approval from the City Council and the powerful Hotel and Gaming Trades Council. Consequently, only two new hotels have been approved in the past three years, significantly slowing the expansion of hotel capacity.

Adding to the reduced room availability, the city extensively used hotel rooms to house migrants, with a peak of about 19,000 rooms occupied between 2021 and 2023. As of a recent report, approximately 14,000 rooms remain off the market due to these contracts, although City Hall plans to shutter 53 migrant shelters by June. The combination of these factors has led to higher occupancy rates and increased pricing power for the remaining hotels.

Industry analysts point to these three major policies—the migrant hotel shelters, strict short-term rental regulations, and the new hotel construction requirements—as primary drivers behind the city's elevated room rates. While the hotel union has played a significant role in advocating for these policies, the resulting scarcity of hotel rooms has raised concerns, with Josh Barro specifically noting the potential negative impact on the city's vibrant theater industry.