New York City's hotel sector is showing great strength in the post-pandemic world. In fact, the metro area's 12-month occupancy of 84 percent and average daily rate (ADR) of $313.39, ranks the city first among the 25 hotel markets in the nation, as of the third quarter of 2024, according to an analysis by Cushman & Wakefield, citing data from CoStar.

While the fundamentals were strong, they could even get better for local hotel operators based on three positive market factors, according to Cushman. This includes closures of hotel rooms, a zoning and special permitting process that was recently implemented, and tougher rules imposed on short-term rentals.

Ever since NYC's Council approved the zoning text amendment in 2021, it's become tougher for developers to expand a hotel and build in the metro area due to the mandate of special permits, said Cushman. As of October 2024, just 8,000 rooms were under construction, a 49 percent decrease compared with the middle of 2020. Plus, the elevated interest rate environment hasn't helped either, resulting in higher financing costs for construction. Cushman warned it expects developments for hotels to remain "constrained for the foreseeable future."