New York City restaurant operators and owners say a City Council bill poses an existential threat to many of the city’s hotels.
The Safe Hotels Act, a bill introduced by City Councilwoman Julie Menin in mid-July, has caused an uproar among hotel owners who believe its worker requirements and proposed licensing process would put the city’s entire hotel industry in a stranglehold.
Bill 991 would require hotel owners to obtain a license that would have to be renewed every few years. It would also prohibit hotels from using third-party contractors, require hotels to install panic buttons, require human trafficking training for employees, and require hotels to have at least one security officer on site 24 hours a day.
This week, a group of Indian hotel owners came together to form their own advocacy group, the NYC Minority Hotel Association. The group has about 50 members, represents nearly 120 hotels and more than 900 employees, and says small business owners will be most affected by the legislation.
“We are first-generation Indians here. We worked very hard and started investing in smaller businesses like hotels,” said developer Mukush Patel, whose company Globiwest Hospitality owns and operates about six hotels with a total of 500 rooms in the outskirts. Bisnow“This law will definitely destroy our American dream.”
The introduction of the Safe Hotel Act was a shock to the industry, says Anudeep Gosal, senior director of Besen Partners’ hotel consulting group. An industry acquaintance came across it by chance and contacted him. The wording left both with the impression that the bill was “almost like a contract killing” by one of the city’s most powerful unions, the Hotel and Gaming Trades Council.
“At that point, a hearing had already been scheduled for August to vote on this bill, and no one in the industry had any idea this was happening,” Gosal said. “The alarm bells immediately went off.”
The bill is supported by the HTC union, which Politico called the “most politically influential union in the city.” The NYC Police Benevolent Association and Queens Borough President Donovan Richards also support the bill.
Menin said the bill would help the estimated 3,000 people “who have been victims of human trafficking in New York hotels.”
Richards, meanwhile, pointed to the more than 14,000 criminal complaints filed with the NYPD by hotels and motels in New York City over the past five years.
Richards also said the city’s hospitality industry is no longer struggling with the economic problems it experienced during the pandemic. The tourism industry attracted more than 62 million visitors last year and generated nearly $5 billion in tourism-related tax revenue.
In the weeks following the Safe Hotel Act’s introduction, industry group Hotel Owners of New York announced it would raise $20 million to lobby against the law. A national industry group, the American Hotel and Lodging Association, issued a statement saying the law does nothing to keep hotel guests and employees safe and instead puts New York City’s hospitality and tourism industries at risk.
The Best Western Plus Arena Hotel on Atlantic Avenue in Brooklyn is part of the Globiwest Hospitality portfolio.
Patel believes the licensing requirements are a no-go. Banks would not finance hotels and would even consider existing loans risky, he said.
The Safe Hotels Act’s authors changed the licensing requirement from the original version after vocal, immediate backlash from the industry against the original one-year license proposal. The current text of the bill on the City Council’s website has extended the deadline to two years, but the risk remains the same, Gosal said.
“I’m in discussions with several large national hotel ownership funds, private equity funds that are currently on pause,” he said. “They feel New York is not a safe regulatory investment location. They have changed their acquisition criteria to no longer include New York.”
That means hotel transactions in NYC are on hold, he said. Lenders and investors looking to the future are also concerned that the law could cause hotels to temporarily lose their ability to operate as they undergo the renovation process, and therefore be unable to repay their debts.
“How can a lender give a 30-year mortgage on a license that is only valid for one year at a time?” Gosal asked. “They are putting many small business owners into technical default because of a legal problem.”
The bill also allows “third-party triggers” that affect a hotel’s license, said Hotel Association of New York President Vijay Dandapani. Bisnow by email. These triggers can include, but are not limited to, lack of repairs to elevators, Wi-Fi or water supplies, as well as noise levels that the bill describes as “excessive,” a term it does not define.
Dandapani said the increased costs of the law’s labor requirements could ruin the industry. With no hostels and a significantly reduced number of Airbnbs as a result of the enforcement of Local Law 18, the law could also jeopardize tourists’ desire to travel, he said.
“The city already has high costs because it prohibits affordable accommodations in hostels,” he said. “Many, if not most, hotels in Queens, the Bronx and parts of Brooklyn will go out of business, which will lead to densification and higher prices for the remaining hotels.”
Hotels rely on outside contractors for everything from housekeeping, laundry and dry cleaning to maintenance, security, sales and marketing, Gosal said. Even in a tourism-driven city like New York, hotels are seasonal and need the flexibility to hire accordingly, he said.
While these tasks are not always outsourced, the flexibility needed is essential to adjust operating costs and hotel prices to meet demand, he said. Without that flexibility, hotels are the city’s lowest-priced, lowest-cost options, offering even less affluent tourists even less flexibility and shifting demand to large operators.
“The math is very simple. Anyone with less than 100 or 120 keys, especially detached properties, will not be able to pay their mortgage if they have to follow this law in its entirety, exactly as it is, and if they have to apply union wages now,” Gosal said.
Ultimately, the law will not increase guest safety, Gosal and Dandapani argued. Hotels are often monitored 24 hours a day and require key cards to even use an elevator.
“There are already numerous control mechanisms in place for hotel operations, starting with the occupancy permit, which is a lengthy process that takes several years to obtain,” said Dandapani. “If ‘safety and health’ is indeed a problem in a few exceptional hotels, a bill can be drafted to address these issues.”
