When the jewel-encrusted ball drops in Times Square in New York City on New Year’s Eve in a couple of months, it will be in sight of not only a million screaming revelers but of thousands of new hotel rooms, demonstrating continuing confidence in one of the most famous locations on Earth.
“We’re seeing a huge projected demand for hotels and hotel rooms,” said Tom Harris, president of the Times Square Alliance, the neighborhood’s business improvement district.
In addition to multiple recent hotel openings, there are several hotels under construction and others well along in development, Harris said. While a number of hotels closed during the pandemic, they have almost all reopened or may reopen in the near future, he added.
A primary reason for the activity is that travelers, especially tourists, know the Times Square brand and want to stay in that area, Harris said. While visitor numbers are not back to pre-pandemic levels, developers are looking to the future. And the neighborhood retains its allure, with the anchor of Broadway theaters and with Times Square itself becoming an outdoor performance space with regular performances in the streets.
Centrally located in midtown Manhattan, Times Square is formed by the intersection of Seventh Avenue, 42nd Street and Broadway. It is also the center of the Theater District, which is bounded roughly by Sixth and Eighth avenues to the east and west, respectively, and by 40th and 53rd streets to the south and north, respectively.
And Times Square’s hotel demand numbers are strong. According to preliminary September data from CoStar, the occupancy for Midtown West/Times Square was 88% against 88.5% citywide, rate was $417 compared to $392 and revenue per available room was $367 versus $347 for the whole city. And even though they may not be guests, the 400,000 or so visitors to Times Square on some days represent potential patronage for food and beverage and retail outlets inside or connected to hotels.
Daniel Lesser, president of LW Hospitality Advisors, said that Times Square’s recovery has been “quite remarkable” as it emerged from the depths of the pandemic “when New York was written off as done, dead, over with.” He said it was similar to the situation after 9/11 when lower Manhattan was thought to be in terrible shape only to stage a dramatic resurgence.
So powerful is the Times Square brand that hotels outside of the boundaries of the neighborhood apply the Times Square name to themselves. Zach Demuth, global head of hotels research for JLL, said this is because while 99% of travelers know Times Square, very few know the term “Midtown West,” the New York City neighborhood of which Times Square is a part.
Recent deals also show the strength of the market, Lesser said. He cited three adjacent Hilton-branded hotels — a Hampton Inn, a Home2 Suites and a Motto by Hilton — owned by developer Sam Chang sold in two separate deals for about $450,000 a room. Further, the Renaissance New York Times Square Hotel recently sold for $520,000 a room. Just over a year ago in April 2022, the Sheraton Times Square sold for just over $200,000 a room, which Lesser said “now looks like a grand slam.”
Even select-service hotels in New York City now command “five, six or seven hundred dollars a night” during peak periods, Lesser said. He added that with several major hotels closing, including the nearby Pennsylvania Hotel with over 2,000 rooms, compression nights will help Times Square. The hotel industry defines a compression night as when hotel occupancy across a market exceeds 90% and hotels can drive rates even higher.
In addition, the migrant crisis in New York City has removed several other hotels from the city’s inventory, at least for the time being, Lesser said. And with a new special permit laws in effect that will require hotel developers to go through a challenging process, after a few thousand rooms open in the city in the next two to three years, “you will not see new hotel construction for five to 10 years, making the outlook extremely bright for existing owners,” he added.
Hilton, for one, is making a substantial commitment to Times Square, introducing nearly 2,000 rooms over a relatively brief period with the addition of Motto by Hilton Times Square, Hampton Inn by Hilton Times Square, Home2 Suites by Hilton Times Square and Tempo by Hilton Times Square, the very first for that new brand.
Danny Hughes, Hilton’s executive vice president and president of the Americas, said the company has made such a commitment to the neighborhood because it “works with owners to identify locations with the greatest demand characteristics to give them every chance for success.”
Hughes said Times Square “is a world-renowned location not only for tourists but now for commercial offices, as well,” and “has everything you look for in a great hotel location.”
Transient demand continues to be strong, Hughes said, adding that Hilton is seeing the return of international and business travel segments that had been slower to recover. Hilton has also observed the growth of bleisure travel in Times Square, with business travelers extending their business trips to see shows, visit museums or enjoy restaurants.
Conventions are returning but are not fully back, Demuth said. The neighborhood is not hosting conventions of 30,000 attendees but instead conferences with between 12,000 and 15,000 attendees, which is good for Times Square because it has the city’s largest hotels and can accommodate events of that size within a compact area.
Not only are hotels opening, but long-time hotel stalwarts of the neighborhood are upgrading. The New York Marriott Marquis, completed a “generational” $150 million renovation last year that included a makeover for 2,000 guest rooms, an “elevated” M Club lounge experience, a reconnected restaurant, a new Broadway lounge, an activated lobby with 40-foot digital billboards, and 100,000 square feet of refreshed meeting and event spaces, said Dan Nadeau, general manager of the hotel and area general manager for Marriott International.
Hughes said that the Hilton New York Times Square reopened last October with the addition of the Aladdin’s Times Square Palace Suite, which complements the hotel’s proximity to the Broadway musical “Aladdin.” The hotel is also preparing for an upcoming public space renovation that will reimagine the lobby, as well as food and beverage offerings.
Times Square’s development has significantly benefited hotels in the neighborhood. José Roquette, general manager of Pestana CR7 Times Square, a Portuguese brand, said the new Hudson Yards residential, retail and entertainment development, and the recently expanded Javits Convention Center, both drive business to his property.
Hughes also pointed to the “incredible revitalization” between Times Square and Penn Station, which is about eight city blocks away, with the opening of the Moynihan Train Hall, which is an extension of Penn Station in a historic post office building and now a hub for restaurants.
With all the current and past development Times Square, there is now a wide range of properties — from the Chatwal and the Edition at the luxury end to many limited-service options and big-box stalwarts such as the recently renovated New York Marriott Marquis — offering, as Harris said, “a different price point for everyone depending on what they’re looking for.”
In fact, Times Square’s 35,000 hotel rooms account for a full 25% of all New York City hotel rooms, Demuth said.
Looking Ahead
As will be the case for New York in general, development of hotels in Times Square will be limited in the near future. While the rate of room increase was between 6% and 8% pre-pandemic, Demuth predicted it will only be 1% in the next few years. And it will also take much longer to build because of supply-chain disruptions, labor challenges and a difficult construction financing environment.
As a result, existing hotels and those to open soon will benefit. They may also get a boost from a new law severely restricting short-term rentals, Demuth said. While Times Square did not have many short-term rentals because it is a commercial area, that law should have a positive impact as well because if more than 30,000 short-term rental units are lost, there will be additional compression nights.
Looking ahead, the outlook for Times Square is bright because of the return of international tourism — particularly now from Asia — as well as the neighborhood’s fame, Harris said.
“There are many places in the world where you can go to the beach or visit a tourist attraction, but there is only one Times Square,” he said.