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Hotel prices in New York City could rise even higher after hoteliers signed what industry officials described as the costliest union contract in the industry's history, blocking a major pay raise for workers while raising concerns about the inability to pay travelers and smaller hotels.
The deal, reported by the Wall Street Journal, reached last week to avert a strike before the start of the FIFA World Cup next month, increases the wages of most hotel workers by nearly 50% over eight years. By 2032, some households are expected to earn six salaries.
Hoteliers say the deal will significantly increase operating costs in a city that already has some of the highest hotel prices in the country outside of major resort markets. New York hotel rooms averaged $334 per night last year, according to CoStar.
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Hoteliers say the deal will significantly increase operating costs in a city that already has some of the highest hotel prices in the country outside of major resort markets. (Stock)
“The only way to maintain your profits when your costs are going up is to keep raising your prices,” Cornell University tourism professor David Sherwyn told the Journal.
Industry officials estimate that the new contract will increase annual property operating costs by about 15%, adding pressure on hotels to pass those costs on to consumers at a time when many travelers are already facing higher fuel, airfare and tour costs.
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The agreement was reached last week to avoid a strike ahead of the start of the FIFA World Cup next month. (Photo by Eva Marie Uzcategui – FIFA/FIFA via Getty Images / Getty Images)
The labor agreement also comes at a difficult time for hoteliers who were hoping the FIFA World Cup would bring a big boost to tourism. As of mid-May, hotel occupancy in New York City in June — when the tournament begins — was running about 12 percent below last year's levels, according to CoStar, despite the region hosting eight games, including the tournament final.
Analysts say that it is possible that some tourists and business travelers are avoiding the city due to concerns about the crowds and the increase in the price of tickets for the World Cup.
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Luxury hotels are expected to do better because affluent travelers have continued to spend despite rising costs. Mid- and low-end hotels could face more pressure as low-income families cut back on travel expenses this year, according to data from the Bank of America Institute.
Industry officials estimate that the new contract will increase annual building operating costs by about 15%. (Gary Hershorn/Getty Images)
International tourism also remains a concern for the city's hotel industry. Hoteliers say overseas bookings weakened earlier this year amid political tensions linked to the Iran conflict, although some suppliers report that demand is starting to recover.
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Hotel managers warn that additional risks – including higher airfares, reduced flight and concerns about US border inspections – could slow the recovery in international travel, which has long been considered a key driver of New York's tourism economy.
