City council considering major tax cut to help hotels post-pandemic

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The New York City Council is so concerned about the slow recovery of the Big Apple’s $100 billion tourism market from COVID-19 that it is considering drastically reducing the local hotel tax to spur a faster rebound , learned The Post.

The New York Hotel Association is urging Mayor Eric Adams and the council to lower the occupancy tax rate on hotel room stays from 5.875% to 2.875%.

The hotel occupancy tax is expected to generate $255 million in revenue for city officials for the fiscal year ending June 30, according to the mayor’s preliminary budget plan.

But studies suggest the city’s tourism market won’t fully rebound to 2019’s pre-pandemic activity levels until 2026.

“We have the tourist tax so high. I really think the tax burden is too high,” said Councilman Amanda Farias (D-Bronx), chair of the Legislature Economic Development Committee.

The New York Hotel Association advocates cutting the hotel tax by more than half.
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Farias said there was “momentum” behind cutting the tax rate by more than half.

“What the hospitality industry is asking for is not too big an elevator. Now is the time to be proactive in helping the tourism industry. We don’t want to wait until 2026 for a comeback,” the counselor said.

A report by the Hotel Association found that a temporary reduction in hotel occupancy tax from 5.875% to 2.875% for two years would allow hotels to increase occupancy rates and generate more revenue.

Hotel
Hotels cut 20,000 union jobs during the pandemic.
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Hotels have lost 20,000 mostly union jobs during the pandemic and that’s another factor board members are weighing.

“They are my neighbors who work in the hotels,” Farias said.

The Hotel Trades Council, the union representing hotel workers, has also lobbied for government assistance. He endorsed Adams’ successful bid for mayor last year and endorsed Governor Kathy Hochul in the gubernatorial race this year.

Former Mayor Bill de Blasio issued an executive order that temporarily suspended the hotel tax from June 1 to August 31 of last year, a three-month “holiday” that provided a $60 million break to the battered industry.

Hotel
Studies suggest New York’s tourism industry won’t return to pre-pandemic levels until 2026.
Corbis via Getty Images

The trade group also recommends that the city waive for three years the 18% interest rate it charges hotels on late property tax payments. Many hotels have fallen behind on their property taxes due to the loss of revenue generated by tourists during pandemic-triggered closures and disruptions.

They are also asking the city to use lower assessed values ​​to reduce property tax bills over the next two years.

A Manhattan lawmaker whose neighborhood is littered with hotels and tourist spots agreed the council needed to act.

Mayor Eric Adams
Mayor Eric Adams has been approved by the Hospitality Trades Council.
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“The pandemic has decimated New York’s hospitality and tourism industries and is still in deep trouble compared to other major cities. While it is encouraging to see more visitors walking our streets again, City Council must take further action to revitalize these areas,” said Councilman Keith Powers, chair of the rules committee representing Times Square, Central. Park South, Midtown, Turtle Bay, Koreatown and the Garment District.

“Tourism is the backbone of New York City, and it’s imperative that we do everything in our power to bring it back strong.”

Adams’ office has not commented on whether he supports a significant hotel tax cut.

Former Mayor Bill de Blasio
Former mayor Bill de Blasio previously suspended the hotel tax from June to August last year.
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But his ‘100 steps forward’ plan unveiled during his mayoral campaign last year backed suspending interest on hotel property tax debt for two years ‘so we don’t sink hotels any further. in financial difficulty, forcing them to close and lay off”.

A report released last week by the American Hotel & Lodging Association predicted hotel business travel revenue in the New York market would be 55% lower than in 2019. This is the second-fastest recovery slow in all urban markets in the country after San Francisco.

Since COVID-19 hit Gotham, more than 115 hotels have closed permanently, leaving tens of thousands of people out of work, the hotel group said.

Amanda Farias
Councilwoman Amanda Farias (D-Bronx) said the city’s hotel tax was “too high.”
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The mayor’s draft executive budget for 2023 reported 5,000 fewer hotel rooms in the city than in 2019, down from 124,000 to 119,000. At the worst of the pandemic, there were 30,000 hotel rooms less.

“Due to the Omicron variant, visitors canceled thousands of hotel reservations towards the end of the month, causing occupancy to drop to around 65%,” the budget plan says. “The forecast assumes collection growth will be moderate for the remainder of the year due to uncertainty around the Omicron variant and its impact on tourism.”

At the beginning of December, the City experienced an occupancy rate of 81.5%, the highest for almost two years, according to the budget analysis of the town hall.

But despite this increase, hotel occupancy rates remain well below pre-pandemic levels. In February 2019, the occupancy rate was 76.5%. In February 2022, the occupancy rate was 56.5%, the hotel association said.

The city saw less than half the number of tourists in 2021 than in 2019, and 6 million fewer than originally expected in 2021.

While tourist numbers are expected to increase this year, the most optimistic projections are still lower than 2019 figures of more than 10 million visitors, Dandapani said.

The slow recovery in tourism could rob city coffers of potentially hundreds of millions or billions of dollars in revenue that helps pay for public services, such as police and schools.

Tourism-related tax revenue alone accounted for 59% of the city’s $2 billion drop in tax revenue in the first year of the pandemic, falling about $1.2 billion, according to a analysis by State Comptroller Tom DiNapoli’s office.

The hospitality industry faces a property tax burden that is double that of major US markets. Property taxes reached a 30% share of hotel revenue in 2020, up from 9.4% in 2019 when tourism boomed, the trade group said.

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