Vijay Dandapani calls on Mayor Bill de Blasio and the New York City Council to extend property tax relief to hotels – Crain’s New York Business

That the pandemic has decimated a vast array of New York City businesses and institutions is self-evident to anyone who has ventured out onto the streets of the Big Apple since March 22, the day the governor’s shelter-in-place order went into effect.

Perhaps none has borne the brunt more so than the hotel industry. More than a hundred hotels remain shuttered while most credible industry analysts forecast that any meaningful recovery won’t occur sooner than 2024.

Although the industry never fully attained revenue metrics that preceded the Great Recession, prior to the pandemic, hotels still comprised a nearly $11 billion industry employing more than 55,000 people, most of whom are New York City residents. In less than a week, over 75% of those revenues vanished into the ether with nine out of every ten employees furloughed or laid off—a devastating and existential blow to a foundational pillar of the City’s economy. Despite these staggering and unprecedented losses, hotels stepped up when New York City most needed them, sheltering thousands of frontline health care workers, recovering patients and the homeless.

Yet this week, the City Council adopted a property tax relief bill that completely ignored the plight of the vital hotel industry. For those who did benefit, the property tax relief bill dramatically lowers interest rates on defaulted property taxes, predicated on revenues from last year — a distant and cruel chimera to hotel owners.

Unlike many similarly impacted industries, hotel owners have little or no ability to pass on their fixed property tax costs to their customers as do commercial landlords who own office buildings and retail space. It’s worth noting that in 2019, hotels paid $1 billion in real estate taxes to New York City along with remitting nearly $2.1 billion in sales and occupancy taxes besides a further $450 million to the state.

Given the multiple tax burdens on hotels, the Hotel Association of New York City has been arguing for a more equitable assessment process for hotel real estate even before the public health crisis. With no relief from the City, a significant contingent of New York City’s hotels will default on their July 1 property tax bills while many will go out of business permanently. As if to add insult to injury, the interest rate on defaulted payments for hotels is set at the borderline usurious rate of 18%. 

The Covid-19 crisis has made the cumulative burden on the hotel industry entirely untenable resulting in an unprecedented liquidity and solvency crisis. In asking for relief, the industry underscored the fact that a return to vibrancy for the city requires the continuance of a substantial number of hotels as part of our tourism infrastructure, borne entirely by the private sector.

While it is obvious that the de Blasio administration and City Council are grappling with a massive deficit in revenues, failure to recognize the certain loss of a substantial number of stakeholders in an essential industry is regrettable and shortsighted.

New York City will eventually surmount the travails brought upon by the pandemic, but rebuilding will be a lot slower, inefficient and more costly without recognizing the need to ensure the vitality of its hotel stock.

Vijay Dandapani is the president and CEO of the Hotel Association of New York City.