Business at city hotels down a stunning 90%

Sales tax figures tell darker story than occupancy rates

From June through August, sales taxes collected from the city’s accommodation businesses fell $2.2 billion short of the year-ago total. (iStock)
From June through August, sales taxes collected from the city’s accommodation businesses fell $2.2 billion short of the year-ago total. (iStock)

Of all the industries devastated by Covid, hotels have perhaps been hit the hardest — and far worse than occupancy rates would suggest.

Sales tax from hotels from June through August were down 90 percent from the same time last year, according to an analysis by the Citizens Budget Commission. That represents a shortfall of $2.2 billion and was even worse than the previous quarter’s 88 percent drop.

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The occupancy rate at hotels in the five boroughs in mid-August was 41 percent, but that figure is deceiving because it only counts establishments that are open. Scores of hotels have closed, many of them permanently, and those that remained open were forbidden from hosting large events such as conferences and weddings.

The precipitous drop in sales tax collection shows just how much business at hotels has withered in the past year. It was the steepest decline among all the sales tax streams collected by the city and the state, although the third-quarter drop in the recreation and entertainment sector was more than 90 percent after a 71 percent year-over-year decrease from March through May, the report found. Between that sector and personal services, where collection was down by more than half, sales tax revenue was down by about $1 billion in each quarter.

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Overall, sales tax revenue across all sectors fell 23 percent over the summer to $34.2 billion. The decline was less severe than the drop seen from March through May, but sales tax collection in the city has lagged that of the rest of the state, where tax sales have rebounded to their 2019 levels.

In the city, restaurants saw the biggest dollar volume decline, with sales down $9 billion from March through August.

One bright spot was retail, where year-over-year sales tax collection was down only 5 percent in the third quarter after being off by 32 percent from March through May, the budget watchdog found.

The Real Estate Board of New York earlier this month found that the city and state have missed out on $755 million in tax revenue this year from real estate sales.