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New York’s Hotels Could Reap $380M From Short-Term Rental Rules

An industry struggling back from COVID-19 scores a major win with regulations aimed at Airbnb and Vrbo


A few months ago, New York City started cracking down in earnest on short-term rentals through sites such as Airbnb. The move was always going to be a positive for the hotel industry.

Just how positive it’s already turned out to be is kind of remarkable. 

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The law is expected to result in 2.2 million additional hotel room nights in 2024 that otherwise would not have been booked. That’s according to a report from brokerage JLL (JLL), which painted a bullish picture in general for New York hotels still struggling with the effects of COVID-19.

Enforcement of the short-term rental crackdown, called Local Law 18, started in September 2023. It essentially requires most hosts of rentals that run for fewer than 30 consecutive days to register with the city, and forbids platforms such as Airbnb and Vrbo from facilitating bookings from unregistered hosts. Local Law 18 mandates other things of hosts and guests, such as hosts having to be present in the property during the short-term stay. As a result of the law, too, the city now maintains a database of buildings that prohibit short-term rentals. 

The rules were meant to squelch what were in many cases illegal hotels: condos and apartments — sometimes several in the same building — where tenants turned over regularly just like guests in legal hotels. Now, the law is also poised to boost a hotel industry that backed its creation. 

“The effects of Local Law 18 will likely be felt toward the end of this year as true enforcement did not begin till September 2023,” Vijay Dandapani, president and CEO of the Hotel Association of New York City, said in an email last week. 

He did say that while hotels were seeing “heightened demand” due to the law, its impact so far was diluted by challenges such as migrants occupying roughly 12 percent of the city’s hotel room inventory and New York’s longstanding ban on building youth hostels. Hotel occupancy in 2023 also trailed figures in 2019, the last full year before COVID-19, Dandapani noted.  

So the anticipation of the gains from Local Law 18 is welcome news for the hotel industry. JLL assumed a 70 percent drop in the supply of short-term rentals following the law’s enactment. That’s the equivalent of shutting down 107 hotels with an average of 255 rooms, the report said. In fact, the number of short-term rental listings on Airbnb, Vrbo and the like in New York City declined 89 percent the first month Local Law 18 was enforced, according to law firm Tane Waterman & Wurtzel.

Those 2.2 million additional room nights are expected to translate into $380.4 million in additional revenue for hotels in 2024, according to JLL. That, the report said, would in turn spur revenue per available room — or RevPAR, the industry’s gold standard for measuring financial performance — to levels not seen since before the Global Financial Crisis 15 years ago. 

The fiduciary kick from the short-term rental rules alone underscores a wider trend in revenue for New York City hotels. In fact, 2023’s RevPAR was 15.2 percent higher than 2019’s average, per JLL, and New York’s was the highest among the major markets the brokerage tracked. 

“For the first time, I think, we’ve seen rates driving the recovery, whereby if you look at historical trends for New York City, occupancy has always been the lead of a recovery after every trough to peak,” said Stephany Chen, a JLL executive vice president and an author of the report. (Occupancy ended 2023 shy of 90 percent, below pre-pandemic highs for nightly room use.) 

The reasons for what turned out to be record average daily room (ADR) rates in 2023 — the figure ended the year at $301.12, per CoStar data cited by JLL — included pent-up demand from travelers willing to pay the prices, Chen said. Inflation, of course, played a role in the higher prices as it did for so many other products and services. 

Accompanying the boost from the restrictive rental rules is also a lack of new supply. The city’s hotel pipeline is expected to expand at an average annual rate of only 1.6 percent over the next three years. That’s 140 basis points below the previous 10-year average, per JLL. 

Fewer hotels are being built in NYC partly because of higher construction costs due to inflation — and the perennial labor and land costs that are higher in New York than in most U.S. markets. JLL pegged the per-room cost of full-service hotel development in 2023 at $796,000, the highest it’s ever recorded and 22 percent costlier per room than acquisitions. No new hotels opened in the city last year on a net basis; 16 opened in 2022.  

New supply is also constrained by another set of city rules: a special permitting process officials enacted in late 2021. That process essentially restricted hotel development in most of the city, and made it more expensive for developers to build and brands to operate through requiring the use of unionized labor. Hotel developers, too, are now subject to the same financing constraints due to higher borrowing costs as other builders.

Whatever the hazards for developers, this all leaves the existing New York hotel pool in which investors and owners — and their brokers — swim particularly warm and deep. Transaction volume in 2023 was its highest since 2016 at $3.3 billion, and JLL expects the volume to increase this year and beyond as borrowing costs level off or decline. 

Much of the investment could come from not only what the report called “frustrated capital” awaiting lower borrowing costs but also from foreign capital. A third of hotel investment in New York in 2023 came from foreign buyers — the greatest share of any cohort that JLL tracked, and far ahead of the 1 percent shares that foreigners claimed in 2021 and 2022. Most of those buyers were from the Middle East, South Asia and East Asia. There’s also that significant difference — 22 percent — between developing a new hotel room and simply acquiring one. 

Then there’s one other factor breaking the industry’s way: an expected jump in international visitors. The number of international tourists to New York increased just under 15 percent annually in 2023, to 10.8 million, according to the city. (Domestic tourism was up 7.9 percent.) The United Kingdom, Canada, France, Brazil and Germany sent the most. China used to be among the top sources of international tourists but enacted strict travel restrictions during COVID. Those restrictions ended in August 2023, and visits are expected to dramatically pick up through 2024.

These visits undercut the primary argument that short-term rental sites such as Airbnb made against Local Law 18. The theory went that fewer short-term rentals would exacerbate the cost of visiting the city — a city that needed the trade from visitors to claw its way back from COVID economically. Airbnb, for instance, released a survey in December that it said showed 65 percent of respondents were less likely to visit due to high hotel costs and a further 54 percent were likely to book short-term stays through “unregulated platforms.” 

The visits to New York City are instead on an upward trajectory, and a hotel industry that backed Local Law 18 is reaping the benefits.

“New York, as an example, saw its strongest RevPAR ever in 2023, and that was still without about 30 to 40 percent of international travel,” said Zach Demuth, JLL’s global head of hotels research and an author of the report. “And international travelers not only stay longer, because they’re coming from farther away, but they often skew toward the more upscale luxury segments. So, the fact that the market was able to drive historic ADR and RevPAR without a key segment gives a lot of optimism for the future.” 

Tom Acitelli can be reached at