“In a New York minute, everything can change. In a New York minute, things can get pretty strange.” Was Don Henley’s 1989 classic, New York Minute, knowingly foreshadowing the current state of affairs of the New York City lodging market? Likely not. But his words nevertheless well-capture a considerably changed dynamic that has the City’s supply-demand ratio, an important consideration of any lodging operation’s pricing strategy, swung more heavily in demand’s favor than at any time over the past 30-years. With travelers returning to New York City en masse, I’m confident that Kasa is among those best positioned to capitalize on these changes and deliver even greater value to our partners.
Short-Term Rental Supply: Local Law 18 dramatically reduces the amount of short-term rental inventory in NYC.
Local Law 18, first put into effect in early September, introduces a stringent set of regulations and enforcement mechanisms on short-term rentals (specifically those properties rented for fewer than 30 consecutive days) making them potentially less attractive to travelers, and giving the City a tool to easily detect unauthorized listings. It introduces regulations such as limiting short-term rentals to a maximum of two guests regardless of the property’s size or number of bedrooms. Hosts are also required to be present during the rental duration, and all internal doors within the property must stay unlocked. To list on platforms such as Airbnb, all hosts must register with the Office of Special Enforcement. During the registration process, properties are checked against a “Prohibited Buildings List” that marks buildings where short-term rentals are prohibited due to landlord preference, lease conditions or other rules.
This law has resulted in a significant reduction in available accommodations for travelers visiting New York. As reported by JLL, short-term rental listings are projected to drop by 32,000 by 2024—a 70% decline. JLL estimates that is equivalent to the closure of more than 100 hotels.
Traditional Hotel Supply: COVID-19 related reductions and impact from the City’s migrant housing program restrict effective hotel supply.
Deeply affected by COVID-19, New York City’s hotel supply remains below pre-pandemic levels, reduced by nearly 10,000 rooms city-wide. Additionally, the City’s significant emergency migrant housing program, which utilized rooms at more than 140 hotels across the five boroughs over the past year, has served to further reduce the effective lodging supply.
New Supply: Significant impediments to new development are expected to restrict the NYC lodging supply pipeline for some time.
In contrast to the significant supply growth the City experienced in the years preceding COVID-19, future supply development across is likely to remain limited due to new special use permit laws, escalating construction costs, and a shortage of construction financing.
Why this matters for partners of Kasa
While many hotel owners across the City are likely to benefit from these improved competitive dynamics, those partnered with Kasa will stand to benefit the most, with a number of distinct competitive advantages creating opportunities for outperformance.
Robust distribution network
Kasa actively distributes its inventory on more than 40 distribution channels including several, like Airbnb, that aren’t frequently or efficiently activated by traditional hotel operations. Whereas traditional property management systems (“PMS”) typically have challenges with Airbnb’s unique listing structure, Kasa’s proprietary PMS, Kontrol, integrates directly with Airbnb, supporting multi-unit availability and other hurdles facing traditional distribution solutions. With the competitive landscape of Airbnb and other short-term rental distribution platforms meaningfully diminished from the effects of Local Law 18, Kasa’s proportional share of listings on these powerful channels increases dramatically, providing direct access to a customer that few hotels are readily able to access.
Diverse array of customers
This breadth of distribution allows Kasa to layer into its demand configurations a more diverse array of customers. We know that the traditional Airbnb guest is a different traveler from a traditional OTA customer, traveling for varied lengths of stay, and with different pricing sensitivities. A diversity of options provides our revenue team with greater strategic flexibility to layer business and drive top-line revenue.
Institutional revenue management and direct sales infrastructure
Kasa employs a team of market experts utilizing advanced tooling to support our revenue management and direct sales efforts, leaving us uniquely equipped to optimize available inventory, maximize revenue, and consistently outperform the market.
As final COVID-19 border restrictions conclude and international travelers beyond pre-pandemic levels, New York has returned as one of the world’s most coveted travel destinations. With supply significantly limited, the current outlook for the City’s lodging industry is bright. Kasa is optimally positioned to seize opportunities available to New York’s existing hotel properties in a way others will not.
To learn more about how Kasa can unleash the potential of your hotel click here.