Dive Brief:
- New York City’s RevPAR hit historic highs in 2023 — exceeding 2019 levels by 15.2% and leading the top 25 U.S. markets — thanks to a “surge in group, corporate and inbound international demand,” according to JLL Hotels & Hospitality’s New York City State of the Lodging Industry report, shared with Hotel Dive.
- JLL expects NYC RevPAR to grow even further over the next four years, thanks in part to the passing of Local Law 18, which requires short-term rental hosts to meet certain conditions and officially register their properties with the city. JLL projects that the law will cause the city’s short-term rental supply to decline by 70%, the equivalent of 107 hotels closing.
- As a result, NYC hotels stand to gain as many as 2.2 million room nights in 2024 thanks to a combination of the new regulations and a limited supply — up to a $380.4 million revenue boost.
Dive Insight:
In 2024, 70 million people are expected to visit NYC, exceeding the 2019 peak by 4.5%. This influx will be fed in part by the resurgence of international travel and the reemergence of group and business demand, according to JLL.
But that doesn’t necessarily equate to more hotel construction. The city’s hotel supply is expected to grow at an average annual rate of 1.6% over the next three years — 140 basis points less than the prior 10-year average.
JLL credits this deceleration to the Citywide Hotel Text Amendment, which requires the City Planning Commission to consider a new hotel's potential adverse effects on the surrounding area, plus rising construction costs and challenges with development financing. This, combined with an already contracted supply and short-term rental restrictions, is expected to benefit existing hotels by as much as $7.35 in RevPAR this year.
Also, due to rising construction costs and ongoing supply chain disruptions, development cost per key for full-service hotels soared to $796,000 in 2023. That’s 22% higher than acquisition cost per key, which means cost-to-buy is significantly less than the cost-to-build.
Because of this, JLL expects investors to prioritize acquisitions over development over the short-to-medium term. New York City recorded 34 hotel trades in 2023, its highest total in history, which boosted its hotel transaction volume to $3.3 billion in 2023 (up 56.1% from 2022 and up 27.4% from 2019).
Foreign capital, driven by Asian and Middle Eastern investors, has emerged as the largest acquirer of hotel assets following nearly three years of limited activity stemming from widespread border closures. JLL expects these groups to continue buying, particularly in the luxury space.
In a previous report, JLL noted that global hotel investment will accelerate in 2024, with urban markets, in particular, attracting investor interest.
In recent months, New York City’s hotel performance has also been bolstered by record-high ADRs, experts previously told Hotel Dive.
