Before the deadly COVID-19 virus ravaged New York last March, our city was arguably the hotel capital of the United States. My two hotels, the Fitzpatricks, were fully booked for months. I had 155 full-time employees.
Now, one year later, one of my hotels is temporarily closed, and there’s no sign in sight of when I can reopen it. My other hotel has been open through the pandemic but running on nearly empty. Only 20 percent of our rooms are booked — and that’s on a good day. I am only able to employ less than a fifth of my staff.
This is devastating. Not just for my family-owned hotels but for the hundred like mine across the city.
The hotel industry employed more than 50,000 New Yorkers, raised $3.2 billion a year in tax revenue and annually added $22 billion in total economic benefits. Now, only 20 percent of hotel workers are employed. I have tried to keep as many staff members employed for as long as I can, but the loss of revenue has made that nearly impossible.
An end to the pandemic may be in sight as vaccinations become readily available, but it could still take years before our economy and the hotel industry fully come back — if, in fact, they ever do.
That’s why we need the city to act, and act quickly.
There are two immediate ways the mayor and City Council can help our industry recover faster, put tens of thousands of men and women back to work, spur tourism and set the hospitality industry on firmer footing.
One would be to fix the disproportionately large property-tax burden hotels face, compared with other Class 4 businesses, like office buildings, factories and stores. The other would be to fix assessment rates that overburden hotels.
Pre-COVID, property taxes consumed 15 percent of a hotel’s revenue. That burden is even more onerous now with the pandemic causing hotel revenue to drop by 80 percent. The weighted average of property taxes as a percentage of net operating income increased by 182 percent between 2008 and 2018, compared with just 24 percent for office buildings.
As a result, many hotels have been unable to pay taxes that were due last July 1 and this Jan. 1. They have little or no cash flow, and unpaid tax bills accrue at a stunningly high 18 percent. The city needs to declare an amnesty on hotel property taxes so shuttered hotels can reopen and those treading water can survive.
It should also level the playing field by making assessments more fairly represent the current value of those hotels. The city should freeze assessment and tax rates in the short term and fix the assessment system afterward. On that score, it’s worth noting that the city’s Tax Commission is hopelessly backlogged and unable to deal with the growing number of challenges to assessments.
The measures we propose would represent a down payment on the recovery of not only the hotel industry but the tourism and hospitality industries as a whole. The more hotels the city can keep open, the more visitors will come to New York — to spend money and enjoy Broadway plays and first-class restaurants, boost the number of full-time jobs and generate more tax revenue for City Hall’s coffers.
I was here during 9/11 — a time that was perhaps the most tumultuous for New Yorkers. None of us knew what would happen next or when tourists would feel safe to return to our great city. But we banded together, and with help from the government, we recovered.
Now, almost 20 years later, if we miss this moment, hotels will close, our tourism will continue to stagger, tens of thousands of workers will be jobless, and large parts of the city will decay.
We must not allow that to happen.
John Fitzpatrick is the owner of the Fitzpatrick Hotel Group New York.
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