NYC Hotel Rates Soar Amid Airbnb Crackdown and Migrant Policy

New York City's hotel rooms are hitting record prices. The main reason? A supply crunch. The city has essentially banned short-term rentals while also converting thousands of hotel rooms into lodging for migrants. A New York Times article this weekend highlighted the issue—here's a closer look at the numbers.

Navigating regulatory environments will be one of many topics discussed at Skift's Short-Term Rental Summit, which will be held in New York City on June 5.

The Numbers

• Average Rate Last Year: $301 a night last year, up 8.5% year-over-year.

• First Quarter 2024: Average nightly rate of $231, up 6.7% from a year earlier.

• The data comes from CoStar's STR.

Key Driver: De Facto Ban on Short-Term Rentals

• Policy Shifts: New regulations have drastically reduced Airbnb listings.

• The Crackdown Boosts Hotel Demand. Short-term rentals had provided about 10% of the city's travel lodging before the crackdown, the New York Times reported.

• Regulators have okayed only a fraction of the city's 40,000 Airbnb listings so far, Skift found in April.

• Hotels in New York City could book an extra 2.2 million room nights this year because of the de facto ban on Airbnb, according to an estimate by hotel broker JLL.

Another Factor: Converting Hotels Into Migrant Shelters

• Temporary Homes for Migrants. About 135 of the city's hotels house migrants, officials told The New York Times. That figure was out of about 680 total. The practice has removed roughly 2% of net hotel rooms from the market compared to pre-pandemic levels.

• No Reversal in Sight. Hotels used as shelters receive up to about $300 a night from the city in some cases, Bloomberg reported. Given this steady income, none have reverted to traditional tourist hotels after joining the shelter program.

Demand Rebound

• Visitor Numbers: Tourism demand for hotels is approaching pre-pandemic highs. New York hotels were 81.7% occupied on average last year, the Hotel Association of New York City told the New York Times. However, that was still five percentage points shy of 2019's occupancy.

Hoping for New Hotels

• Strong Hotel Construction. In good news, supply may loosen as new properties open. As of the end of last year, New York City had 44 hotel projects under construction, which could eventually add 7,338 rooms. The city had the greatest number of hotel projects in the works of any U.S. city, according to Lodging Econometrics.

• However, The New York Times warned that new construction may taper off "because of new zoning rules and special permits, also backed by the influential hotel workers union, that have restricted hotel development, making it more expensive to build and operate hotels."

The Main Takeaway

New York City's mix of reduced hotel supply and the regulatory impacts on short-term rentals is creating a perfect storm that's pushing hotel prices skyward.