City Planning Advances Citywide Hotel Special Permit Proposal

Projects Hotel Shortfall of 32,115 to 62,446 rooms by 2035

City Planning has scheduled January 22 for a public scoping meeting on its proposed zoning text amendment to entirely eliminate as-of-right hotels throughout the city and replace them with a City Planning Commission Special Permit. The draft scope of work includes an analysis by the Department’s consultant which projects a shortfall of 30,000 to more than 60,000 hotel rooms by 2035 due to this amendment.

The EIS must examine in detail the implications and adverse effects of this shortfall on specific industries and categories of businesses, which the preliminary environmental review concludes has the potential to be significant. While not explicitly identified, the analysis would likely look at the impacts on the hospitality and tourism industries, the businesses and jobs they support, cultural and medical institutions, the Theater District, and the health and vitality of the city’s business districts and emerging neighborhoods.  This analysis would also need to include the overall impact on jobs and taxes. 

The scope for the environmental review recognizes that although the COVID-19 pandemic has resulted in an “abrupt and precipitous drop in hotel occupancy and construction, visitation is expected to return by 2025 along with a demand for new hotels.”  The document establishes that a portion of the existing hotels that have closed may not re-open and could be lost to other uses.  As the city’s economy rebounds, tourism and business activities return, the remaining supply of new hotel rooms will be unable to meet future demand.  Because new hotels would be limited by the special permit proposal, this has the potential to impact the city’s economic recovery, specific businesses and industries, as well as room prices, availability and types of lodging, and the distribution of hotel facilities within the City.

Background

In 2018, the City adopted a hotel special permit for M1 manufacturing zones while eliminating as-of-right hotels in these districts.  This amendment was intended to reduce land use conflicts between hotels and industrial uses, while recognizing that the tourism industry is essential to the City, generating new jobs and helping to support a large number of businesses and cultural institutions.  This amendment was crafted to recognize the importance of continuing as-of-right hotel development in commercial districts throughout the city, as well as special mixed-use (MX) districts.  Since the text amendment was adopted, no hotel special permits in M1 districts have been processed.

Proposed Citywide Text Amendment

Under the Department’s proposal, as-of-right hotels would be prohibited and a hotel special permit would be required for all new hotel developments in commercial and MX district in the five boroughs, including such areas as Lower Manhattan, the Theater District, Hudson Yards, Harlem, Downtown Brooklyn, Jamaica, Flushing the Bronx and Staten Island.  According to the scoping document, the intent of the special permit is to create a more consistent framework for new hotels and to address potential conflicts with nearby uses.  If adopted, any new hotel would be subject to the City’s full environmental and land use review procedure (ULURP).

In 2019, there were close to 128,000 hotel rooms in New York City.  The increase in hotel rooms over the prior decade was fueled by a growth in the economy as well as accommodating a record 67 million visitors in that year.  According to the information provided by the Department, the New York City hotel market had the highest occupancy rates of any hotel major urban market in the country.  As noted in the material, hotels are an important part of the City’s business districts and economy “lodging an estimated 28 million visitors and accounting for $13 billion in direct and indirect business sales.“ In 2019, hotels directly supported close to 306,000 jobs. 

There are a number of hotel projects in the pipeline that may not be built, and new as-of-right hotels would be prohibited. The consultant projects that this text amendment could result in a significant shortage of hotel rooms by 2035, ranging from over 30,000 to more than 60,000, depending in part on the number of existing hotels that remain in hotel use, and how many proposed projects currently in the pipeline are completed.  Recognizing the significance of this shortfall, the Department states that it will evaluate mechanisms to limit the effects on reductions in supply, including changes to “discontinuance” provisions for hotels closed during the pandemic, as well as modifications to vesting provisions and applicability of the special permit to certain planned hotel projects.  

Next Steps

Following the scoping session, the Department will be completing the environmental review prior to starting a formal public review of the text amendment. They have yet to announce a date for this public review, although it is expected to start in the first half of 2021.    

Capalino has been closely following this text amendment and are prepared to examine how it could affect your hotel project, your business plans, and potential solutions to limit its impact. Please contact Group Leader Richard Barth at richard@nullcapalino.com for further information.