Why Are New York City Hotels So Expensive?

If you like challenges, try to find a good value, less expensive decent hotel in New York City.

You’d think with the recession prices would be more moderate, but no. Here are the main reasons why and more. I know these won’t really ease the pain!

1.

Even after 9/11, British and European travelers flocked to New York due to exceptionally favorable exchange rates. Besides, New York City was “in” with American travelers and still is. These factors helped keep hotel prices considerably higher than elsewhere, as seen by examples from Hotels.com below.

• Las Vegas Hilton $45.95
• Hilton Washington, $171.74
• Hilton Chicago, $138.60 – $242.10
• Hilton New York $399.00

2.

New York City has long been constrained by geography. It can no longer simply expand out onto large tracks of thinly populated and very inexpensive land as can a Phoenix.

3.

Nevertheless, even when there are opportunities, the city has failed to appreciate and act upon the economic harm—meals, entertainment, tours, and retail items not purchased–caused by prospective visitors either reducing the number of nights they stay or not coming at all because of lack of affordable hotel choices. Tourism generates huge auxiliary revenue, and New York is not getting its share.

Adding New York City’s hotel tax of 5.875% to a combined city and state sales and use tax of 8.875% does not help a bad situation.

More importantly, even though Manhattan may lack land and building stock inexpensive enough for budget hotel development, there are underutilized neighborhoods such as immediately across the East River in the Long Island City that could be made attractive with better streets, landscaping, and transit options for tourists, along with powerful tax incentives for developers of budget hotel accommodation.

4.

New York’s real estate boom of the 1980’s and 1990’s decimated the stock of small and moderate cost hotels. These “cashed out” to convert to expensive condos and high-level commercial uses, a trend that also impacted 4-star hotels. In addition, huge prospective rent increases forced out many restaurants favored by travelers, such as the Second Avenue Deli (now happily reopened elsewhere) and the former Zen Palette on Union Square.

As a result, there is not one inexpensive (by NYC standards) hotel left in Manhattan that I feel fully comfortable recommending. You pay significantly more than in other American cities for a so-called 1-, 2-, and sometimes even a 3-star hotel and still often end up with an uncomfortably-sized inferior room with serious maintenance issues that may even smell.

You are considerably safer with 3.5- and higher hotels, especially 4-star ones, but even Hotwire and Priceline can have problems helping with the high rates for these.

Not hopeless

There is hope, however.

Soon, I’ll give special NYC booking and bidding tips to help you save.

Also, with real estate prices declining, we may be seeing the beginning of “spend thrifty” hotel upgrades, such as the new fantastic seeming Pod Hotel conversion in Midtown that I have not yet visited.