Tourism is undeniably a cornerstone of New York City’s economy, injecting billions of dollars annually. In 2024, the city welcomed nearly 65 million visitors, marking the second-highest number on record. This influx considerably bolsters the city’s tax base and supports tens of thousands of hotel workers. As New York City Mayor Eric Adams stated, “We are proud to welcome nearly 65 million visitors to New York City in 2024, the second-highest number on record. Tourism is a vital part of our economy, and we are thrilled to see it thriving.”

However, the industry faces significant challenges, including trade tensions, rising inflation, and increased borrowing costs, hindering its full recovery from the COVID-19 pandemic. New York City is especially vulnerable due to its high cost of doing business.

The key to sustaining a thriving tourism sector lies in a robust hotel industry. To remain competitive with other major destinations like London and Paris, New York City hotels require relief. A proposed solution involves reducing the city’s hotel room occupancy tax, currently among the highest in the nation.

As the city’s budget process unfolds, City Hall and the City Council have an prospect to stimulate revenue by lowering the hotel room occupancy tax. While seemingly counterintuitive, reducing the tax from 6% to 3% is projected to increase tax revenue by boosting hotel occupancy rates.

The rationale is simple: lower rates attract more tourists, leading to increased tax revenue. Ancient data supports this claim. In December 1994,when the city last implemented such a reduction,the Independent Budget Office (IBO) observed that “despite the one percentage point decline in New York City’s hotel occupancy tax rate… total city hotel occupancy tax receipts have actually increased.”

Since 1994, the tax burden on tourists has steadily increased. Along with the 6% hotel room occupancy tax, guests face a 9% sales tax, a $2 room fee, a 0.375% commuter surcharge,and a $1.50 convention center fee per room per day. New York City hotels also bear the burden of the highest property taxes in the country.

This high tax environment negatively impacts hotels, workers, and the overall tourism industry, a situation that will likely worsen without intervention from City Hall and the City Council.

New York City is gearing up for several high-profile events, including the 2026 World Cup, expected to draw 1 million tourists, the city’s 400th-anniversary celebrations, and annual events like the U.S. Open and NYC Marathon. However, the hotel industry must be in a position to capitalize on these opportunities by stimulating demand.

the Plight of NYC Hotels

The supply of available hotel rooms has significantly decreased due to COVID-19 shutdowns and the industry’s commitment to housing asylum seekers. Reopening these rooms requires investment,which is challenging to secure given the current high tax rates. The city can directly address this issue by reducing the hotel room occupancy tax.

Many hotel owners, particularly those operating small, family-run businesses, are concerned about potential closures and layoffs. The industry has already lost thousands of jobs since 2019. Given that the hotel industry is a major employer of low-income and immigrant New Yorkers, it is crucial to provide opportunities for job restoration and creation, especially for those struggling to make ends meet.

Cutting the tourism tax to 3% would encourage more hotel stays, especially group bookings, which are vital to the success of hotels.

According to a recent study on hotel occupancy taxes, “higher occupancy taxes can dampen certain market segments, particularly group business.” Lowering the tax on tourists will allow hotels to secure group bookings we’re now losing out on. It will keep hotels open and workers employed. It will also allow new hotels to be built.

Economic Impact and Benefits

Reducing the hotel tax rate would also benefit New Yorkers directly. In the previous year, the tourism economy saved New York households $2,000. This figure could increase further with a steady influx of tourists staying in the city’s hotels.

To attract more tourists to New York City, it is essential to provide them with compelling reasons to choose the city’s hotels. The hotel industry serves as the backbone of the tourism economy. To fully realize its potential, the city must reduce the hotel room occupancy tax to 3%. Investing in hotels now will stimulate the city’s economy and benefit all New Yorkers.

Comparative Analysis of Hotel Taxes in Major Cities

New York City’s combined hotel taxes are significantly higher than those in other major U.S. cities,potentially discouraging tourists and impacting the competitiveness of local hotels. The following table provides a brief comparison:

note: Tax rates and fees are subject to change. Please verify with official sources for the most up-to-date information.

Potential Counterarguments and considerations

While the proposed tax cut aims to stimulate tourism and increase revenue, some argue that it could lead to a short-term decrease in tax collections before the anticipated increase in hotel occupancy materializes.Concerns have also been raised about the potential impact on city services if initial revenue declines are not offset by increased tourism.

To mitigate these concerns, it is essential to implement the tax cut in conjunction with targeted marketing campaigns to attract more visitors and promote New York City as a premier tourist destination. Additionally, the city should closely monitor the impact of the tax cut on hotel occupancy rates and tax revenues to make informed adjustments as needed.