City Council eyes big tax cut to help hotels post pandemic

City Council eyes big tax cut to help hotels post pandemic

The New York City Council is so concerned about the sluggish recovery of the Big Apple’s $100 billion tourism market from COVID-19 that it’s considering dramatically slashing the local hotel tax to spur a faster rebound, The Post has learned.

The Hotel Association of New York City is urging Mayor Eric Adams and the council to lower the occupancy tax rate on hotel room stays from 5.875% to 2.875%.

The hotel occupancy tax is expected to generate $255 million in revenue for city officers for the fiscal year ending June 30, according to the mayor’s preliminary budget plan.

But studies suggest the city’s tourism market won’t fully bounce back to 2019 pre-pandemic levels of business until 2026.

“We have the hotel occupancy tax so high. I definitely think the tax burden is too steep,” said Councilwoman Amanda Farias (D-Bronx), chairwoman of the legislature’s economic development committee.

Grand Hyatt
The Hotel Association of New York City is advocating to lower the Hotel tax by more than half.
Corbis via Getty Images

Farias said there is “momentum” behind slashing the tax rate by more than half.

“What the hotel industry is asking for isn’t too big a lift. Now is the time to be proactive to help the tourism industry. We don’t want to wait until 2026 for a comeback,” the councilwoman said.

A report by the Hotel Association found that a temporary reduction in the hotel occupancy tax from 5.875% to 2.875% for two years would allow for hotels to increase the occupancy rates and generate more revenue.

Hotels cut 20,000 union jobs over the pandemic.
Getty Images

Hotels shed 20,000 mostly union jobs during the pandemic and that’s another factor that council members are weighing.

“These are my neighbors who work at the hotels,” said Farias.

The Hotel Trades Council, the union representing hotel workers, has also been pushing for government relief. It endorsed Adams’ successful bid for mayor last year and has endorsed Gov. Kathy Hochul in the gubernatorial race this year.

Former Mayor Bill de Blasio issued an executive order that temporarily suspended the hotel tax from June 1 to August 31 of last year, a three-month “holiday” that provided a $60 million break to the battered industry.

Studies suggest New York’s tourism industry won’t return to pre-pandemic levels until 2026.
Corbis via Getty Images

The trade group is also recommending that the city waive for three years the 18% interest rate it charges hotels on tardy property tax payments. Many hotels fell behind on their property taxes because of the loss of tourist-driven revenues during shutdowns and disruptions triggered by the pandemic.

They’re also asking for the city to use lower assessed values to lower the property tax bills over the next two years.

A Manhattan lawmaker whose district is littered with hotels and tourist spots agreed that the council has to act.

Mayor Eric Adams
Mayor Eric Adams was endorsed by the Hotel Trades Council.
Getty Images

“The pandemic decimated New York City’s hotel and tourism industries, and are still severely struggling in comparison to other major cities. While it’s encouraging to see more visitors walking our streets again, the City Council must take further action to revitalize these sectors,” said Councilman Keith Powers, the rules committee chairman who represents Times Square, Central Park South, Midtown, Turtle Bay, Koreatown and the Garment District.

“Tourism is the backbone of New York, and it’s imperative that we’re doing everything in our power to bring it back in full force.” 

Adams’s office had no comment on whether he supported a big hotel tax cut.

Former Mayor Bill de Blasio
Former Mayor Bill de Blasio previously suspended the Hotel tax from June-August last year.
Getty Images

But his “100 Steps Forward” plan unveiled during his mayoral campaign last year supported suspending hotel property tax debt interest for two years “so that we do not push financially distressed hotels deeper into debt, forcing closures and layoffs.”

A report released by the American Hotel & Lodging Association last week projected that hotel business travel revenue in the New York City market would be 55% lower than 2019. That’s the second slowest recovery of any urban market in the country after San Francisco.

Since COVID-19 hit Gotham, more than 115 hotels have closed permanently, leaving tens of thousands of people out of work, the hotel trade group said.

Amanda Farias
Councilwoman Amanda Farias (D-Bronx) says the city’s hotel tax is “too steep.”

The mayor’s preliminary 2023 executive budget reported 5,000 fewer hotel rooms in the city than in 2019, dropping from 124,000 to 119,000. During the worst of the pandemic, there were 30,000 fewer hotel rooms.

“Due to the Omicron variant, visitors cancelled thousands of hotel reservations toward the end of the month which caused occupancy to drop to around 65 percent,” the budget plan said. “The forecast assumes collection growth will be subdued for the remainder of the year due to the uncertainty around the Omicron variant and its impact on tourism.”

In early December, the City experienced an 81.5% occupancy rate, the highest in almost two years, City Hall’s budget analysis said.

But despite that increase, hotel occupancy rates remain much lower in comparison to pre-pandemic levels. In February 2019, the occupancy rate was 76.5%. In February 2022, the occupancy rate was 56.5%, the hotel association said.

The city saw less than half the number of tourists in 2021 as it did in 2019, and 6 million fewer than originally anticipated in 2021.

While tourism numbers are projected to increase this year, the most optimistic projections still fall short of 2019’s numbers by more than 10 million visitors, Dandapani said.

The slow recovery of tourism could deprive city coffers of potentially hundreds of millions or billions of dollars in revenues that help pay for public services, such as policing and schools.

Tourism-related tax revenue alone accounted for 59% of the city’s $2 billion decline in tax collections during the first year of the pandemic, plummeting by about $1.2 billion, according to an analysis by state Comptroller Tom DiNapoli’s office.

The hotel industry faces a property tax burden that is double that of major US markets. Property taxes ballooned to a 30% share of hotel revenue in 2020, up from 9.4% in 2019 when tourism flourished, the trade group said.

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