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<\/p>\nFaced with a choice between a potentially devastating work stoppage during a once-in-a-generation sporting event and agreeing to massive wage increases, New York City hotel owners opted for the latter.<\/p>\n
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\n Hotel workers rally outside City Hall in February.\n <\/p>\n
The\u00a0Hotel and Gaming Trades Council<\/a>\u00a0and the Hotel Association of New York struck a deal this week for a new bargaining agreement<\/a>, clearing the way for unionized hotel workers\u00a0to earn\u00a0more than\u00a0$100K a year.<\/p>\n The deal ensures that hotels will operate without disruption during the World Cup and America 250 celebrations, but it also means the country’s most expensive hotel market by far isn’t getting more affordable for travelers anytime soon.<\/p>\n \u201cAt the end of the day, this is going to put upward pressure on room rates,\u201d said Daniel Lesser<\/a>, CEO of LW Hospitality Advisors<\/a>. \u201cI don’t see any other way you can solve for this challenge.\u201d<\/p>\n Wages for housekeepers and other workers at roughly 250 hotels will increase incrementally over the next eight years by roughly 52% overall, reaching $60 an hour by 2034 \u2014 the largest increase in the union’s history. Hotel operators will also continue to pay the full costs of healthcare for members and their families.<\/p>\n The deal is expected to be ratified following a vote from the union\u2019s 27,000 members Thursday. It is the most generous hotel labor agreement in the country, industry players told Bisnow.<\/p>\n The agreement amounts to a cost increase of roughly 15% for owners, Hotel Association of New York President and CEO Vijay Dandapani<\/a> said.\u00a0<\/p>\n The previous contract was set to expire June 30, four days before the 250th anniversary of the Declaration of Independence and less than three weeks before the FIFA World Cup Final.<\/p>\n While New York hotels have the highest occupancy levels of any U.S. market, owners have been struggling to keep up with rising expenses.\u00a0<\/p>\n Hanging over the negotiations was a bill under consideration in the New York City Council, similar to one passed in Los Angeles last year<\/a>, that caps the square footage that hotel housekeepers can clean every day.<\/p>\n New York\u2019s version of the legislation would have added almost 40% in expenses, Dandapani said. It was withdrawn last week as conversations between the union, which has deep influence in City Hall and Albany, and hotel owners progressed.\u00a0<\/p>\n \u201cThat would have really upended the marketplace,\u201d Dandapani said. \u201cWe were negotiating with that threat over our head.\u201d<\/p>\n A string of recent union-led strikes served as a\u00a0warning to hoteliers\u00a0that a labor walkout was a serious threat, Dandapani said.<\/p>\n In late 2024, it took owners and Boston\u2019s hotel union almost two months<\/a> to come to an agreement after a strike at several hotels, resulting in wage increases of almost $10 an hour and improved benefits. LA\u2019s hotel union carried out a strike in 2023<\/a> that led to an agreement now seen as unpalatable to hotel investors, industry leaders have said.<\/p>\n This week, a three-day Long Island Rail Road strike ended with a wage increase<\/a>\u00a0after three days of commuters facing delays of up to three hours<\/a>. In January, 15,000 nurses\u00a0at three city hospital systems\u00a0started a strike that\u00a0lasted six weeks<\/a> over pay, staffing levels and layoff protections. They were\u00a0joined by Mayor Zohran Mamdani<\/a>\u00a0on the picket line.<\/p>\n The city’s real estate industry has been careful to avoid a similar fate.<\/p>\n Apartment landlords last month dodged a strike by 32BJ SEIU<\/a>, which represents 34,000 doormen<\/a>, at the eleventh hour by agreeing to pay an additional $4.50 an hour<\/a> \u2014 an approximately 13% increase over four years \u2014 to union workers, plus enhanced benefits.\u00a0<\/p>\n \n A view of Midtown Manhattan from a hotel room window\n <\/p>\n Labor is the largest expense for hoteliers, accounting for as much as 55% of the business\u2019s overall cost structure, said\u00a0Chris Darling, a senior analyst and head of U.S. lodging and gaming research at\u00a0Green Street<\/a>. The new contract only increases risk for any hoteliers already struggling with mounting expenses.<\/p>\n \u201cThis is a significant cost burden,\u201d he said. \u201cIt’s a big, right-in-your-face number, but obviously spread out over eight years.\u201d<\/p>\n Despite the wage escalations, a\u00a0new contract means investors and potential buyers have more predictability and a better way of underwriting deals, Lesser said.<\/p>\n But that certainty doesn\u2019t negate the sector\u2019s ongoing financial difficulties. Hotel operating costs across the U.S. are rising four times faster than revenues, according to data<\/a>\u00a0from the\u00a0American Hotel and Lodging Association<\/a>. Insurance has increased by 111% since 2019, while utilities are up 28% and property operations are 23% costlier.<\/p>\n In NYC, owners also face occupancy taxes of almost 6% and an 18% interest rate on property taxes,\u00a0according to HANYC<\/a>. As of last year,\u00a0they must also pay<\/a>\u00a0a $350 licensing fee every two years.<\/p>\n \u201cLots of other expenses are going up faster than revenues. That’s an untenable situation,\u201d Lesser said. \u201cHow long can you go where revenues are increasing less than expenses?\u201d<\/p>\n Hotel owners have been raising their rates to compensate. The average daily rate for NYC hotels last year was $334, up 5% from 2024,\u00a0according to<\/a>\u00a0the city\u2019s tourism body,\u00a0NYC Tourism<\/a>\u00a0+ Conventions. ADR rose nearly 6% between 2023 and 2024, according to CoStar data.<\/p>\n So far in 2026, ADR is up 2.3%, but revenue per available room hasn’t kept pace, up 1.8%.\u00a0<\/p>\n Union rules mean hotels can\u2019t cut staffing levels unless hotels cease offering existing services, like the 2,000-key New York Hilton Midtown did with its room service\u00a0in 2013<\/a>.<\/p>\n \u201cThe only way you can make up for it is by pushing your revenues,\u201d Lesser said.<\/p>\n But the ability to raise rates depends on demand.<\/p>\n Around 65 million tourists came to NYC last year, below the 66.6 million who visited in 2019,\u00a0according to NYC Tourism + Conventions<\/a>. The number of tourists coming from abroad fell by 3.2%, with domestic travel’s 1.7% increase only making up for some of that loss.<\/p>\n \u201cOperators would love to pass through some of these costs as best they can,\u201d Darling said. \u201cBut ultimately, that’s a consumer-driven outcome.\u201d<\/p>\n New York\u2019s role as one of the U.S. host cities for the upcoming FIFA World Cup added to pressure to get a deal done well ahead of the current contract\u2019s expiration, Dandapani and Lesser said.<\/p>\n The World Cup is unlikely to add to demand for rooms in the way that hotel operators had hoped: Bookings in 11 U.S. host cities were\u00a0below initial forecasts<\/a> for 80% of respondents surveyed this spring by the AHLA. New York City hotels have filled only 25% to 30% of their rooms during the tournament, below last year’s summer pace, according to CoStar data reported by Commercial Observer<\/a>.<\/p>\n There are five games scheduled across the Hudson River at\u00a0MetLife Stadium<\/a>, with two games \u2014 including the\u00a0World Cup<\/a>\u00a0final \u2014 taking place after the contract expired. Even if bookings don’t meet prior expectations, a work stoppage during that period wasn’t something hotel owners were willing to risk.<\/p>\n<\/p>\n