New York Could Slash Hotel Tax To Help Downtrodden Sector Recover

New York City lawmakers are considering slashing tax obligations for hotel owners as they struggle to regain their footing after the pandemic hammered the city's tourism industry.

The Hotel Association of New York City has asked Mayor Eric Adams and the New York City Council to drop the occupancy tax rate on hotel room stays to 2.875% down from 5.875%, a move that has support from some members of the council.

New York City Council Member Amanda Farias told the New York Post there is “momentum” growing to cut the tax rate by more than half, and added that she doesn’t consider the industry’s request a “big lift."

“We have the hotel occupancy tax so high. I definitely think the tax burden is too steep,” Farias, who is chair of the legislature’s economic development committee, told the Post. “We don’t want to wait until 2026 for a comeback."

The hotel industry in the city was hit hard by the pandemic, with nearly all business and leisure travel coming to a halt, and it remains far from fully recovered. Hoteliers were given a tax holiday for three months last year, but the industry in the city still felt major pain. 

The occupancy tax is set to generate $255M for the city for the fiscal year ending June 30, per the mayor’s preliminary budget plan.

The association says 115 hotels closed permanently, with well-known operations like the Roosevelt, the W Hotel Downtown and the Maxwell Hotel shutting their doors for good. Multiple hotels have sold for a fraction of their previous values, too. Still, data from research firm Lodging Econometrics predicted in January that some 9,000 new rooms in 53 hotels are expected to open in the city this year, even as tourism hasn't returned to pre-pandemic levels.

NYC & Co., the city's tourism arm, has projected that 56.4 million visitors will come to the Big Apple this year, a 70% jump from 2021, but well below the 66.6 million people who came in 2019.

The state has also attempted to roll out a plan that would allow vacant hotels to be turned into affordable housing, but it has failed to make any real traction so far.

The program, introduced by then-Gov. Andrew Cuomo in August, set aside $100M in the state budget and provided New York’s Division of Housing and Community Renewal the ability to approve nonprofits' purchase and conversion of city hotels in distress. However, the program had received just one application as of February.