JLL Hotels & Hospitality has updated its New York City State of the Lodging Industry for 2023, with promising forecasts for 2024. Among the key takeaways:
Total transaction volume was up 56.1 percent from 2022 and up 27.4 percent from 2019 for the highest volume since 2016 at $3.3 billion. The report credited this to “strong fundamental performance” and the sale of “multiple iconic luxury hotels.” The city recorded 34 hotel trades in 2023, its highest total in history. The company expects “frustrated capital” to be “drawn off the side-lines” thanks to accelerating revenue per available room and the Fed’s tightening cycle coming to an end.
The city reached the highest year-end RevPAR in its history, surpassing 2019 levels by 15.2 percent and 2022 levels by 18.1 percent. JLL credits this to a “surge in group, corporate and inbound international demand” and predicts further growth over the next four years.
Nearly 62 million visitors came to the city in 2023, 9.4 million of whom were international visitors. Total 2023 visitation was 7.2 percent below peak 2019 but should get back to and surpass that level by year-end 2024. The anticipated levels of international visitors, which historically attributed to 20 percent of total visitation into New York City, is projected to surpass prior peak levels this year. Total visitor numbers are likely to exceed the 2019 peak by 4.5 percent.
Following a decade of historic growth, New York City hotel supply is expected to grow at an average annual rate of 1.6 percent over the next three years, 140 basis points less than the prior ten-year average. This deceleration of new supply is driven by the recent Citywide Hotel Text Amendment, rising construction costs and challenges with development financing.
Over the past decade, the city’s hotel supply growth has outpaced the broader U.S. by 290 basis points, which has put downward pressure on the market’s occupancy and RevPAR. Rising construction costs and new city ordinances on development are expected to curtail new hotel supply over the next three years which will allow existing hotels to drive both occupancy and average daily rate.
At the same time, development cost per key for full-service hotels is likely to reach $796,000, 22 percent higher than acquisition cost per key and the highest in the market’s history.
The city’s existing short-term rental supply should decline by 70 percent following the passing of Local Law 18 (also known as the Short-Term Rental Registration Law, which requires owners, shareholders and renters to register with the Office of Special Enforcement before they can rent out part of their unit for less than 30 days). This would be equivalent to 107 hotels closing, assuming an average hotel size of 225 rooms. New York City’s hotels could gain as many as 2.2 million room nights in 2024, above and beyond its forecasted growth. This translates to an additional 4.3 percentage points in occupancy.