New York City is among the greatest cities in the world, drawing domestic and foreign tourists visiting for business or pleasure. In order to keep up with the city’s status as an international destination, real estate moguls have been developing hotel rooms in Manhattan and the other four boroughs for many years to meet the demand. You no longer only see hotels in Midtown and Times Square; they’ve popped up across all neighborhoods. At Bisnow’s NYC Hotel Investment & Development Summit, a panel of experts gathered to discuss the current hotel market, factors impacting the industry right now, and what could be in store for the future.
Developers keep building. Right now, more than 16,000 hotel rooms are under construction in the five boroughs and 13,000 of them are in Manhattan. When this is all said and done, there will be a 16.5 percent increase in the city’s inventory. While New York is undoubtedly a popular destination, will there be enough demand to fill all these rooms? In addition to what experts are calling an oversupply, there are a number of factors that come into play.
The first is the value of the American dollar. Panelists noted that 83 percent of foreign travelers come to New York for leisure. But if a stay becomes too expensive, not as many tourists will visit, which would have a detrimental effect. Another factor affecting the hotel real estate market is developers’ ability to find lending sources. It’s not as easy today as when the market was revived a few years ago. Lenders want to know that they’re going to see results–and fast.
But it was apparent that the biggest issue facing developers today is what Bisnow’s experts referred to as the “shared economy,” and more specifically, room-sharing service Airbnb.
Airbnb is valued at $13 billion and makes up 5 percent of NYC’s rental market. A recent Forbes article examined a study commissioned by Airbnb on its economic impact on San Francisco. As illustrated here, it is a huge supplier of beds in cities across the nation. This has been a point of contention for hotel developers in New York City. According to the Keynote speaker Patrick Denihan, CEO of Denihan Investments, Airbnb adds no real value to the economy, pointing to the lack of jobs created by the service. Airbnb guests are also overpaying. Airbnb’s market share in New York is only getting larger. Many developers and other city officials are fighting back, calling Airbnb’s listings illegal because of zoning law violations and cheating the city out of millions of tax dollars. But in the era of Uber and other sharing services, will pressure from New York residents grow to permit apartment-sharing? The conversation continues.