A Shock In contrast to Any Different – Vijay Dandapani (SHA ’87) on the State of NYC’s Resort Market – Cornell Actual Property Evaluation

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New Yorker Hotel

The resort trade in New York Metropolis has seen its fair proportion of macroeconomic shocks over the previous few a long time.  From the 1975 fiscal disaster, to the inventory market crash of 1987, the terrorist assaults of September eleventh, and naturally the good recession in 2008 – the resort trade within the monetary capital of the world has at all times bounced again.  Nonetheless, the impact of every of those pales compared to the shock the trade is presently experiencing with the COVID-19 pandemic.  In every of those previous downturns, the resort trade recovered after about 18 months, and occupancy by no means fell beneath 70%.  When Governor Andrew Cuomo issued an government order closing non-essential companies in mid-March, occupancy and income at lodges throughout town dropped 80-85% instantly – sending a shock wave by the trade with unprecedented magnitude.  The consensus amongst trade consultants is that income and occupancy won’t return to pre-pandemic ranges till 2024-2025.  “This stuff are usually not swift and there can be attrition,” warned Vijay Dandapani (SHA ’87), President & CEO of the Resort Affiliation of New York Metropolis (HANYC).

NYC RevPAR Actual and Forecast
Precise and Forecasted Income per Out there Room (2005 – 2025) courtesy of HANYC                                      (Knowledge from CBRE, STR, HVS, Lodging Advisors)

Having labored solely within the metropolis’s hospitality trade for over 30 years, Mr. Dandapani shared his insights on the present state of the trade and the headwinds going through the world’s largest resort market (by pre-COVID room depend) with college students in Cornell’s Baker Program in Actual Property as a part of the weekly Distinguished Speaker Sequence.  Mr. Dandapani served as President of Apple Core Resorts, a New York Metropolis primarily based resort developer and operator, and had been concerned in HANYC for a few years earlier than assuming his present function.

The oldest resort affiliation within the nation, based in 1878, HANYC represents greater than 700 lodges – about 200 of which have been closed because the center of March.  Lobbying is a big focus for the Affiliation.  When lodges throughout town have been deemed non-essential companies, HANYC strongly lobbied towards the order and prevailed.  Roughly 200 lodges have been then in a position to open and welcome within the metropolis’s homeless, permitting them to unfold out past congested shelters.  With medical professionals flooding into town to help with the outbreak of COVID-19, it was additionally crucial that lodges reopen to offer these important staff with locations to remain.

Midtown NYC Lockdown
Often bustling, Midtown Manhattan was abandoned in the midst of the COVID-19 lockdown

Mr. Dandapani harassed the significance of expert operators in creating and sustaining worth at particular person properties – declaring {that a} good operator can have as much as a 25% impression on a resort’s backside line.  “Resorts are usually not actual property.  They sit on actual property,” he quipped, reinforcing that valuations are extremely influenced by who is working the resort.   

Earlier than the onset of the present international pandemic, probably the most vital points going through the resort trade – not simply in NYC, however internationally – was the disruption introduced on by Airbnb and related platforms akin to HomeAway, One Effective Keep, and Vrbo.  In 2019 there have been 85,000 short-term rental listings within the metropolis mixed, in comparison with roughly 100,000 resort rooms, underscoring how rapidly this a part of the trade has ramped up.  A big a part of that development, stated Mr. Dandapani, has been because of the alternative for regulatory arbitrage that these platforms present.  One instance is the stringent and expensive fireplace and life security requirements to which all lodges should adhere, and which short-term rental hosts have largely been in a position to keep away from.  In a uncommon collaboration, HANYC and the Resort Trades Council have teamed as much as foyer towards the short-term rental trade’s proliferation within the metropolis.

Though they haven’t but been profitable in establishing a citywide registry of listings, as seen in different cities, they’ve made vital progress in different areas, akin to proscribing the variety of nights homeowners can hire out their dwellings to 30 complete nights, and cracking down on so-called “ghost buildings,” the place a whole constructing is comprised of short-term leases.

In relation to the present lending atmosphere for lodges, Mr. Dandapani is seeing nice want from lenders to increase phrases on current mortgages to maintain them categorised as performing loans.  To this point, solely two New York Metropolis lodges have filed for chapter, however the prevailing thought is that the bell will toll for a lot of others, in direction of the top of the yr, as soon as the CARES Act and different authorities subsidies dry up.  With lodges contributing about $3B per yr in taxes to town, the implications for the business tax base of town might be fairly dismal, nonetheless Mr. Dandapani, like many New Yorkers, is fast to level out that New York Metropolis has at all times bounced again.  Solely time will inform how lengthy it takes this time round.

The solar rises on the 4 Seasons Downtown NY in Tribeca
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