New York City hotel rates could climb even higher after hoteliers signed what industry officials describe as the most expensive union contract in the industry’s history, guaranteeing big pay increases for workers while raising affordability concerns for travelers and small hotels.
The agreement, reported by The Wall Street Journalagreed last week to avoid a strike before the FIFA World Cup kicks off next month, increases hourly wages for most hotel workers by about 50% over eight years. By 2032, some housekeepers are expected to earn six-figure salaries.
Hotel owners say the deal will significantly increase operating costs in a city that already has some of the highest average hotel prices in the country outside of major resort markets. Hotel rooms in New York cost an average of $334 per night last year, according to CoStar.
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Hotel owners say the deal will significantly increase operating costs in a city that already has some of the highest average hotel prices in the country outside of major resort markets. (iStock)
“The only way to maintain your profits when your costs rise is to keep raising your rates,” Cornell University ” hospitality professor David Sherwyn told the Journal.
Industry officials estimate the new contract will increase the properties’ annual operating costs by about 15 percent, increasing pressure on hotels to pass those expenses on to consumers at a time when many travelers are already facing higher costs for fuel, airfare and vacations.
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The deal was reached last week to avoid a strike before the FIFA World Cup kicks off next month. (Photo by Eva Marie Uzcategui – FIFA/FIFA via Getty Images / Getty Images)
The labor deal also comes at a difficult time for hoteliers who had hoped the FIFA World Cup would provide a major boost to tourism. As of mid-May, according to CoStar, New York’s hotel occupancy rate for June — when the tournament began — was about 12 percentage points below last year’s levels, although the region had hosted eight matches, including the championship final.
Analysts say some tourists and business travelers may be avoiding the city because of concerns about crowds and soaring World Cup ticket prices.
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Luxury hotels are expected to fare better because travelers with higher incomes have continued to spend despite rising costs. Midscale and lower-tier hotels could face greater pressure as lower-income households cut travel spending this year, according to data from the Bank of America Institute.
Industry officials estimate the new contract will increase the properties’ annual operating costs by about 15 percent. (Gary Hershorn/Getty Images)
International tourism also remains a concern for the city’s hospitality industry. Hoteliers say overseas bookings declined earlier this year due to geopolitical tensions over the Iranian conflict, although some operators report that demand is starting to recover.
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Hotel executives warn that additional risks — including rising airfare prices, flight reductions and concerns about U.S. border controls — could further slow the recovery of international travel, which has long been seen as a key driver of New York’s tourism economy.