Proposed New York City Hotel Regulation Threatens To Push Prices Even Higher

With prices skyrocketing, the city is weighing whether to regulate hotels further by barring them from hiring contracted workers.

Since banning most short-term rentals in 2023, New York City has seen hotel prices skyrocket. Now the city is considering a measure that would almost certainly force prices even higher.

The bill, proposed by New York City Councilwoman Julie Menin, targets non-union hotels, prohibiting hotel owners from hiring contracted workers for many positions, such as housekeeping, security, and bartending. The measure would require hotel owners to directly employ these workers rather than rely on cheaper subcontracting services.  

Further, the proposed law would also require all hotels to obtain a license in order to operate. As a condition of licensing, hotels would need to hire a 24-hour security guard, who is also licensed. 

Many hotel owners say the measure would increase their costs and reduce margins, forcing them to increase already-high prices, cut staff, or close entirely.

"This is like a nuclear bomb" Vijay Dandapani, president and CEO of the Hotel Association of New York City, told the New York Post. "It will destroy a major segment of the industry. This is a bazooka to kill a gnat."

So far, the proposal has received strong support from the Hotel and Gaming Trades Council, an influential union representing the hotel industry.

"Licensing, quite frankly, is one of the most powerful and effective tools we have to regulate business," Menin told The Post. "Hotels are an important economic driver of this city and we want to make sure that they are properly regulated in a way that benefits all."

In 2023, the average nightly cost of a hotel room in New York City was just over $300, up 8.5 percent from 2022. Much of the increase can be attributed to the city's decision to ban most short-term rentals, coupled with a flood of migrants the city is legally required to house. (According to The Wall Street Journal, over 11 percent of the city's hotel rooms have been contracted to house migrants.)

Instead of focusing on measures that could help lower prices—like lessening the giant regulatory hurdles toward building and operating more hotels and apartments—New York City might be heading toward erecting another barrier that will make the high prices at the city's hotels even higher.