Ordinarily, New York City hoteliers would be looking forward to their boom time of year: the United Nations is in town, theater and cultural life resume at full speed and the always busy holiday season.

While 2021 is clearly an improvement over 2020, uncertainty looms.

John Fitzpatrick, who owns namesake hotels on Manhattan’s East Side and near Grand Central Terminal, had consolidated operations at the Fitzpatrick Grand Central for most of the pandemic, closing the uptown location for an extended period. He reopened The Fitzpatrick Manhattan a couple of months ago and reports that while occupancy has improved to 70% to 75%, he is not getting pre-pandemic rates because of a lack of business travel.

While there are few cancellations yet, he is taking things day by day. If Broadway reopens as scheduled in mid-September, that would be a huge boost. Perhaps the biggest determinant for the fall will be whether international travel will resume.

He said his conversations with Europeans showed “they are chomping at the bit to come to New York.”

The Pierre General Manager Francois-Olivier Luiggi said occupancy reached 60% at a high rate in July, but occupancy now has sunk to about 50% while maintaining elevated rates. He attributed the high prices to the luxury property selling suites first and for longer periods. That might mean a family reunion or other big celebration or medical treatment with bookings for multiple suites. Rates are high in the upper-luxury segment because there are few corporate travelers paying negotiated rates.

One major drag, Luiggi said, is no one is in the mood for large events right now. He sees a lot of demand for small social events and even smaller conferences for organizations that derive their income from these conclaves. It remains to be seen whether major charity events this fall are canceled or will go hybrid which can be equally if not more expensive if production values are high.

One big question for Manhattan especially is whether the U.N. will have a live session as planned or if it will be partly virtual. That is a huge piece of the business for the city, which compresses rates significantly. Luiggi said in the past, a U.N. group needed to place a 50% deposit by July, but now that is not the case.

“We are not flexible on rate, but we are on terms," he said.

Peter Yeung, managing director, Walker Hotels, with properties in the Tribeca and Greenwich Village neighborhoods of Manhattan, said there has been a small but steady climb in occupancy and rate and a consistent improvement in revenue per available room. Most of the business is in the leisure segment with local and domestic travel.

He added group business is just starting to come back and there has been some business travel, but it is still limited.

The variation in performance among New York hotels is extreme, said Bjorn Hanson, adjunct professor at the Jonathan M. Tisch Center of Hospitality at New York University. Some hotels are achieving their highest rates ever because there are so few corporate and group-occupied rooms, and the highest occupancies are on busy weekends. Some hotels are achieving 2019 level occupancies but at lower rates to attract leisure demand. Others continue to experience their worst performance ever with low occupancies and rates.

It was generally assumed that international travel, which Hanson noted is vitally important to New York's lodging industry, would return sooner and stronger than is now anticipated. That affects some hotels more than others.

The consensus expectation now is there will be more commercial demand and small and mid-size group demand than last year, but the outlook is “disappointing,” he said.

Sean Hennessey, owner of Lodging Advisors, a consultancy focusing on the New York market, said while occupancy has been trending upward due to the summer tourist season, the pace of improvement is slowing as some companies delayed the transition back to the office. Fall is a big question mark when summer vacation travel trails off and corporate and group meeting travel usually increases.

The outlook was good in June and July, said Vijay Dandapani, CEO of the Hotel Association of New York, with occupancy reaching nearly 70% and rate almost $210. That was reversed, however, in August with anecdotal evidence of delta variant-driven cancellations.

Hotels are not sitting still in the face of constant changes and obstacles. Dandapani said HANYC advocated for continuing the suspension of the occupancy tax through the end of the year. However, the city did not extend the suspension, ending it Aug. 31. The association is also continuing to advocate for a lower property tax rate.

Continually shifting policies around vaccines, masking and other virus-related measures are proving a challenge.

Fitzpatrick is hoping the delta variant does not affect business any more than it has. He said mask requirements should never have been taken away, adding, “I don’t have an issue with masks.”

The key to overcoming problems has been daily communication sessions with staff to review the evolving policies, Yeung said. It also involves friendly communication and enforcement of rules with guests who have been understanding and cooperative with all the mandates.

The sales and marketing focus at the Walker hotels has been on attracting leisure guests with new experiential programs that “give back to small businesses and different communities,” Yeung said.

One silver lining in the pandemic-induced downturn of 2020 is New York real estate taxes are based on the previous year’s revenues, and Fitzpatrick said this year’s levy is well off what it has been. However, he had to pay full taxes all last year when revenues were minimal.

At The Pierre, the hotel is moving toward mandatory vaccinations as is the situation in Paris where a vaccination passport is necessary to go into many places, Luiggi said. That sentiment is driven by the fact that there are many residents at the Pierre, a cooperative building, and some residents don’t want to ride the elevators with unvaccinated hotel guests.

Luiggi said he has to deal with relentless bookings, cancellations and rebookings. The hotel has generous policies around refunds, and the many bookings from international travelers have mostly been canceled.

Like most in the industry, some New York hoteliers are having trouble with staffing. Fitzpatrick said that those with skills like bartenders or accountants can work anywhere, and many have moved on.

At The Pierre, there has been little problem getting back the unionized staff because of the great benefits they enjoy, Luiggi said. Only about 20 to 30 people have retired or moved on out of a staff of 460. The problem, has been with management who have moved on to other places. About 10 to 15 managers have left, adding that it might not have been the pandemic, but they were simply ready to leave.

“What was a darling market has turned into a real dog,” said Daniel Lesser, CEO of LW Hospitality Advisors, which offers a range of “hotel-centric” services including consultancy and asset management. While he strongly believes in the long-term prospects of the city’s hospitality industry, the challenges before COVID-19 — high property taxes, union labor and oversupply — combined with those during the crisis, make short-term success difficult.

Jonathan Falik, CEO of JF Capital Advisors, a hospitality strategic and capital markets advisory firm, said there is a lot of activity around lower price point independent hotels where lenders are controlling the sale or agreeing to short sales.

A lot of this buyer universe, he said, is “international investors looking at pure basis investment decisions where they can buy at a very low price per key and hope to trade out within a few years at a meaningful increase.” International investors are also looking at attractive basis transactions from a longer-term perspective.

The most appealing deals are non-union properties and limited-service branded hotels without a lot of food and beverage, Falik said. The least attractive are big box group/convention hotels with union contracts, as they will take longest to recover.

There have been numerous transactions during the pandemic done by “smart, savvy investors” who are in it for the long run, Lesser said. They have invested because they think the city will recover “as it always does,” because they are getting good deals and because an amendment to the city’s zoning code will severely limited future supply.

Falik agreed that with the high likelihood the zoning change will happen, “we will see much less development and new supply going forward, which will be highly beneficial for (rate) growth and price-per-key value.”

Among the major transactions since the pandemic began were:

• Embassy Suites by Hilton Times Square was purchased by Magna Hospitality for $115.1 million or $371,000/key in 2020.
• The Surrey, in a prime Upper East Side location, was bought by the Reuben Brothers (wealthy British investors) for $151 million or $795,000/key in 2020.
• New York LaGuardia Airport Marriott was sold to ASAP Holdings for $132.7 million or $300,000/key this year.
• The Z NYC in Long Island City (Queens) was purchased by ASAP Holdings for $384 million or $384,000/key in 2021.
• The Lexington, on Manhattan’s East Side, sold for $185 million or $256,000/key. It was bought by a joint venture including MCR, Island Capital Group and Three Wall Capital this year.

New York City will always remain an attractive investment market, Dandapani said, and that will hold true once the city gets past the present crisis. Major international names are still looking to come here and may be waiting a year to make deals.

Hennessey said his sense is that the country and the world are slowly recognizing that COVID-19 is a risk to be managed rather than eliminated, but significant travel safety concerns still exist. He expects the city will avoid the hotel business' 2020 lows, but that full recovery to 2019 demand levels remains several years off.

It’s important to get the corporate traveler moving again, Fitzpatrick said. He said the remote working novelty has worn off, especially for younger people who want to mix with friends. That is evidenced by a booming bar business at his hotels — especially with significant outdoor dining at the Grand Central location.

Another change in the market that is a positive for some and a negative for others is a number of competitors having closed permanently, and Fitzpatrick said he and his sales team are out in the field “pushing and trying to get their business.”

“I am not pessimistic,” said Luiggi, “because people keep booking. They want to come to New York.”