Pandemic Puts N.Y.C. Hotels on the Brink: ‘A Complete Washout’

Sep 28, 2020 No Comments by

Several big hotels in the city have announced that they are closed for good, and some experts say that more shutdowns are coming.

Many of New York City’s biggest hotels closed their doors in March when the coronavirus wiped out tourism and business travel. The shutdowns were supposed to be temporary, but six months later, with no potential influx of visitors in sight, a wave of permanent closures has begun.

Sinking under the weight of overdue mortgage payments and property taxes, some hotels have already shut down for good, and many others are struggling to survive.

In the last two weeks, the 478-room Hilton Times Square and two Courtyard by Marriott hotels in Manhattan said they would not reopen, joining several others that had already closed for good, including the 399-room Omni Berkshire Place in Midtown.

All told, more than 25,000 hotel employees have been out of work for more than six months, making the industry one of the hardest-hit in the city and emblematic of the challenges New York faces as it tries to recover from the economic crisis set off by the coronavirus outbreak.

Financial experts say they expect the pace of hotel failures to accelerate as lenders lose patience half a year into the pandemic.

 

“The fall is really in New York the strongest season of the year for hotels,” said Douglas Hercher, managing director of Robert Douglas, an investment banking firm that specializes in hotels. “It kicks off with the United Nations General Assembly, conventions, the holidays, the Rockettes. That whole season is basically going to be a wipeout.”

Vijay Dandapani, the president of the Hotel Association of New York City, which represents 300 of the city’s hotels, was equally glum about the industry’s prospects.

 

“The year’s a washout,” Mr. Dandapani said in an interview. “It’s a complete washout.”

Mr. Dandapani said in late summer as few as seven percent of the roughly 120,000 hotel rooms in the city were filled with traditional guests. The overall occupancy rate for the city’s hotels was close to 40 percent, down from more than 80 percent a year before, according to STR, which tracks the hotel industry.

When virtually all business and leisure travel screeched to a halt in March, hotels quickly laid off their workers and shut their doors. More than 30,000 unionized hotel workers were sent home.

Early on, the general expectation in the industry was that the lockdown imposed by the state would be eased far sooner and the closings would last only a few months. Then, in late June, Gov. Andrew M. Cuomo announced that visitors from a list of states with high rates of infection would have to quarantine for 14 days upon arrival in New York.

That list grew to include as many as 34 states, cutting off any real hope of domestic business, while international travel was essentially halted after the United States banned travelers from many parts of the world, including most of Europe, China and Brazil.

 

“This quarantine has really put the dagger to the throat,” Mr. Dandapani said.

The quarantine, combined with the restrictions on public gatherings, left hotels with few customers to vie for.

 

“The U.S. Open tennis tournament is the biggest sporting event of the year for hotels normally,” Mr. Dandapani said. “But this year, with no fans in the stands, it filled just one hotel, the one where all of the players and tournament staff stayed. The biggest sources of guests this summer were health care workers and the homeless people the city put up to limit the spread of the virus. About 180 hotels served those groups.”

Cristina Marino had worked as a server at the rooftop bar in the Hyatt Centric Times Square since it opened about five years ago. She and her husband, a bartender in the same hotel, were laid off and started collecting unemployment benefits. They are anxiously awaiting a call back to work.

Ms. Marino said her managers were eager to reopen and had set three different reopening dates: A plan to reopen in August was postponed to September, then to October and most recently until November.

 

“This is difficult and really frustrating because we are dying to go back to work,” said Ms. Marino, who said she was four months pregnant with her first child. “We love our jobs.”

Ms. Marino said she and her husband, residents of the Riverdale neighborhood of the Bronx, had gotten by on unemployment benefits, including the $600 weekly supplemental benefits from the federal government that ran out in July. They were awaiting three weeks’ worth of the $300 payments from the Federal Emergency Management Agency that President Trump arranged.

Their health care benefits had been scheduled to expire at the end of August, but union officials obtained an extension, paid for by the hotels, through the end of the year. That deal spared two of the clinics the union’s health fund operates, one in Harlem and one in Brooklyn, that were slated to close in October.

 

“We need health care,” Ms. Marino said.

Tom Blundell, the general manager of the Hyatt Centric, said he has been making a decision toward the end of each month about when a reopening seems feasible.

 

“It’s kind of a moving target,” Mr. Blundell said.

He recently set Nov. 10 as the date but said in an interview that reopening then would hinge on a relaxation of the state’s quarantine rules, for one thing. Ending the ban on international travelers is also critical to restoring the hotel to profitability, he added.

 

“That would get us back to a place where we could really fight for survival,” Mr. Blundell said. “With all of those things in place, there’s really not a fight to put up.”

Almost all of the hotel’s 225 employees have been laid off since March. Mr. Blundell said he keeps them apprised of his plans but does not know how many he would call back to work, or when. He said he was uncertain about whether the hotel’s restaurant or its rooftop bar, where Ms. Marino and her husband work, would open when the hotel does.

 

“You’re not going to support a restaurant with a hotel that’s running a 5 percent or 10 percent occupancy,” Mr. Blundell said.

He added that only two of the eight hotels that the Hyatt Centric considers its closest competitors were open in early September. Most of the hotels that were open in the city were limited-service hotels, many of which are not unionized.

A few hotels are braving the slump. The Pierre, a luxury hotel near Central Park, reopened on Sept. 17 after a six-month “pause.”

Representatives of the Hilton Times Square, the Omni Berkshire Place and the Courtyard by Marriott hotels on 35th Street and Fifth Avenue, all of which are closing permanently, did not respond to requests for comment.

Mr. Hercher, of the investment banking firm, said there was “some gamesmanship” going on between hotel owners and the Hotel Trades Council, the powerful union that represents 39,000 room cleaners, porters, desk clerks and other workers. Owners would like to reduce their labor costs before reopening by negotiating changes in the union’s work rules.

 

“The only leverage that some owners have is to close their hotels or threaten to close their hotels,” Mr. Hercher said.

The president of the hotel union, Rich Maroko, disputed that assessment.

 

“These hotels aren’t closed because of labor costs,” Mr. Maroko said. “They’re closed because there aren’t guests. When the guests return, they’ll reopen.”

In the meantime, the union’s members are better off than many other unemployed New Yorkers. Under a master contract that runs until 2026, their employers have to recall them when their jobs become available again.

 

“Along with the extended health benefits, some members will receive a form of severance payment to serve as a financial bridge until they can return to work,” Mr. Maroko said.

Mr. Dandapani said he had tried repeatedly to persuade city and state officials to help hotel owners by deferring property taxes and adopting a virus-testing system in lieu of the blanket quarantines for out-of-state visitors.

Hotels had been generating more than $3 billion a year in taxes for the city and about $450 million for the state, he reminded them, to no avail so far.

 

“All those numbers seem like a mirage,” Mr. Dandapani said. “New York is like an island with a moat around it and the drawbridge has been pulled up.”

Caitlin Girouard, a spokeswoman for Mr. Cuomo, said, “Of course we understand the difficulties facing the tourism industry while travel worldwide has essentially come to a halt. Everyone is trying to avoid a potential second wave that would send infections spiking and force businesses to close down again.”

 

Source: The New York Times

Economy, Hospitality, Retail

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