NYC hotels brace for slow recovery despite rebound in foreign tourism

Friday, November 19, 2021


After 20 months without a single guest in its more than 1,000 rooms, the Hyatt Grand Central in Midtown Manhattan is now sold out on weekends through the end of the year.

The hotel was one of roughly 200 citywide that suspended operations at the start of the pandemic.

Now, the reopening of U.S. borders to vaccinated foreign tourists is breathing life back into the hospitality industry but a full recovery could take years.

Some of the most lucrative travel markets have not yet returned such as tourists from China. While hotels continue to reopen and return to business, more than 100 in the city will remain closed for good.

New hotel construction has offset these losses, but a deficit of thousands of rooms won’t be available to travellers, resulting in booking shortages as demand increases. The state comptroller reported in April that 37,000 rooms closed citywide after the pandemic’s first wave- about one-third of the boroughs’ inventory.

For the hospitality industry, the return of international visitors is vital to its survival. The city’s official tourism and marketing organization, NYC & Company, said the pace of recovery is led by these leisure travelers.

International travelers are the critical final concentric circle of our recovery, said Chris Heywood, Executive Vice President at NYC & Company. The return of foreign travelers was a pivotal milestone moment in our recovery.

Foreign tourists are roughly 20% of all New York City visitors, but they spend more than three times the amount of domestic tourists, the comptroller found. They are responsible for half of hotel bookings.

New York City’s highest-spending international customers, travellers from China, won’t be making reservations any time soon. China’s government has grounded most international travel for its citizens. Their absence has put a serious dent in hotel bookings. The comptroller’s report showed visitors from China spent nearly $3.3 billion out of the total $80 billion in tourist dollars in 2019.

That was more money than any other group of foreign travellers. British travellers represent the largest group of foreign travelers to New York City, but they were outspent by people from China by nearly three to one. Without that cash influx, business could remain sluggish until 2025.

And even tourists who can travel freely will still face hurdles entering America. The U.S. requires both proof of vaccination and a negative COVID-19 test from foreign visitors- a protocol more stringent than Americans face when visiting Europe.
The negative test requirement can add significant costs, which Vijay Dandapani, President of the Hotel Association of New York City said could ultimately impact international travel. For example, in London airports a PCR test on departure can cost as much as $100.

Most of Hyatt Grand Central’s current flow of visitors are luxury leisure travelers from Europe- with the United Kingdom topping the list. British tourists represent nearly 10% of all foreign visitors and 8% of international tourist spending, according to NYC & Company.

International business travel, in contrast, remains stagnant. On average, visitors on work trips spend more than double the nights in the city’s hotels than domestic guests, according to the Hotel Association of New York City.

Without business travel and tourism from China, the Hotel Association of New York City doesn’t expect a recovery until 2025. But Joe Gaeta at the Hyatt said any increase in business is a good sign. He is optimistic that even without Chinese tourists, the hotel industry could return to pre-pandemic business sooner than later.

According to NYC & Company, current vacancies are averaging more than 30%- compared to around 10% before the pandemic. Low occupancy gives travellers more bargaining power to drive down rates- to more than $40 below what they were.

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