Sharif El-Gamal, chairman and CEO of Soho Properties and owner of the new Margaritaville Resort Times Square, admitted as a developer and real estate investor he’s a “little nervous” about the reopening of New York after the havoc wreaked by COVID-19. But the city’s rebound after every major crisis in the past also gave this New York native some hope.

“New York always opens up bigger, better and stronger after every catastrophe,” he said in an interview. “That will continue to be the case. You already feel the energy in the streets. This business is cyclical. We are starting a new cycle." He added that he's "seeing a real spike in activity."

One clear sign that gave him hope was when a retail tenant two months ago agreed to a 12-year lease for the 5,000 square feet of space on the ground floor of the hotel, located at 560 7th Ave. by 40th Street and a short walk from Times Square.

How much is the tenant paying? A thousand dollars per square foot, El-Gamal told CoStar News. “They are paying me an arm and a leg for the property.”

By comparison, the retail market rent in the Times Square submarket declined 1.5% to $254 per square foot from a year earlier, while the rate in the city fell 3.6% to $43 in the same time, according to CoStar’s latest data.

“That shows you the momentum,” El-Gamal said at a preview event of the property, where musician Jimmy Buffett performed his signature song that the resort chain is named after. “This asset is a market maker.”

El-Gamal declined to identify the tenant.

The 32-story, $370 million development features what it bills as the only year-round outdoor heated pool in Times Square, a 32-foot replica of the Statue of Liberty holding a margarita, and views of the iconic ball used in New Year’s Eve celebrations as well as the Manhattan skyline. It opens to the public July 1 to coincide with the city’s official reopening, a test for an area that was at the center of the pandemic about a year ago and that has a commercial property sector that's still battered.

The hotel’s 234 rooms, each with an island-inspired theme and a ceiling fan a traveler would find more often in tropical climates than urban New York, is about 30% booked every month through the end of the year, with the percentage even higher near the end of the year, between Dec. 27 and Jan. 3, Kori Yoran, the resort hotel’s general manager, told CoStar.

Those bookings command an average daily rate in the mid-$300s in July, with the rate surging to at least $800 to $900 near the year-end countdown festivities, he said.

In comparison, the daily rate in the Midtown West and Times Square area averaged $186 in the week that ended June 5, according to hospitality data and analytics firm STR, a unit of CoStar Group, the parent of CoStar News.

“We are seeing very good traction,” Yoran said, adding the booking window also starts to stretch far in advance instead of people waiting until the last minute to book. “I’m happy that we are there so quickly. Now that we are closer, we are seeing spikes. That’s going to keep growing.”

Where the bookings came from also surprised him. In addition to those from the tri-state area, guests also will come from other states including California, Texas and Florida, as well as overseas from countries including Australia, the United Kingdom, France and Amsterdam, he said.

”We weren’t expecting that much international travel,” he told CoStar.

In another indication travelers are gradually returning to New York, Empire State Realty Trust recently said its iconic Empire State Building observatory is starting to see long-distance visitors from outside New York, New Jersey and Connecticut. And the newly opened Harry Potter flagship store, also in Manhattan, has welcomed shoppers from Virginia to California.

Margaritaville Resort’s bookings signal that the depressed hospitality market in New York could be edging toward recovery.

Average hotel occupancy in the week ended June 5 jumped to 72%, the highest since early March 2020, according to STR. The average daily rate averaged $181.15, also the highest since March of last year. Revenue per available room of $135.58 was the highest since about the same time last year, STR data shows.

“There’s so much pent-up demand,” John Cohlan, CEO of Margaritaville Holdings, the operator of hotels, restaurants and casinos featuring the brand, said in an interview. “Who would have known these vaccinations would be so successful? Never underestimate the drive people have for their leisure.”

In fact, that demand is evident across Margaritaville Holdings’ U.S. properties. Both its hotels and restaurants saw business rise 10% in April and May from their 2019 pre-pandemic levels, according to Cohlan. Being in mostly “drive-to-leisure” locations also kept them relatively shielded from the slowdown in air travel and other restrictions, he said.

The New York resort is the company’s first foray in the Northeast. There are 24 Margaritaville resorts in 21 cities and seven countries, with 18 in the United States.

Declining to be more specific, Cohlan said he expects the location will turn profitable “very quickly,” thanks to the five restaurants and bars it has that can attract foot traffic and yield sales of “high-margin” drinks.

The resort, despite some positive signs, is competing in a market still deeply wounded from the fallout of COVID-19. New York continues to lead the top 25 U.S. lodging markets in terms of the number of hotels that remain closed, according to a CoStar hospitality market report. As of early June, about 100 hotels were temporarily closed, and 20 hotels have shut permanently since the beginning of the pandemic.

Luxury hotels have been particularly hard hit from the lack of international tourists and business travelers, the CoStar report said, adding those properties make up half of the 100 that are still closed.

In efforts to revive its ailing tourism industry, New York launched a $30 million marketing campaign and decided not to collect the city’s hotel occupancy tax for the summer.

The occupancy rate for top-tier hotels in the city, while having recovered to 48% in the week ended June 5 from 41% a year earlier, is still far short of the near 90% in the same week in 2019, according to STR data.

As demand remains low, Margaritaville Resort also will vie against other newly built hotels. It’s one of 15, with a total of 3,500 rooms, that’s scheduled to open in the Manhattan area with the most hotels debuting this year, according to the CoStar report. Citywide, 70 hotels, nearly 13,000 rooms, are projected to open in 2021.

“The supply of new hotels under construction in New York shows no signs of abating despite the difficult financial circumstances many existing hotel owners are in,” the report said.