February 27, 2025
In the coming months, New York City will end its contracts for thousands of hotel rooms that have served as shelters for the waves of migrants who have arrived in the five boroughs.
What comes next largely depends on the physical condition of the buildings — and the financial condition of their owners.
“Whatever happens is going to happen within the next six months,” Anudeep Gosal, senior director of Besen Partners’ hotel advisory group, told Bisnow. “There are probably two to three dozen properties that are pressed to make decisions.”
Mayor Eric Adams announced the end of contracts for nine hotels in January, plus another six earlier this month. On Monday, he declared that the city was terminating its contract with the 1,000-key Roosevelt Hotel in Midtown Manhattan, which had served as the main intake hub for migrants entering the city.
The shelters were originally set up as the city attempted to comply with its “right to shelter” law when more than 228,000 asylum-seekers arrived in NYC in a two-year period. By the time June rolls around, Adams will have axed 52 emergency shelter contracts within 12 months, according to a press release from his office.
Neither the New York City Comptroller’s Office nor the mayor’s office provided Bisnow with current numbers of properties operating as migrant shelters or total terminated contracts. But the number of migrants leaving shelters now exceeds the number entering them, according to data compiled by the comptroller: There were 51,800 asylum-seekers in city-funded shelters in December, down from a peak of around 69,000 last January.
Somewhere between 65% and 75% of the 16,000 hotel rooms that have served as shelter will likely return to the market, Hotel Association of New York City President Vijay Dandapani estimated.
“You’re going to have a fairly large inventory coming on the market, not all immediately,” he said. “That’s going to put some pressure on occupancy and rate, without question.”
The city’s hotel market has benefited from the deflated supply. Occupancy in NYC hotels was 84.3% in 2024, up more than 3% from 2023 and the highest of any U.S. market, according to STR.
But despite a 2021 zoning amendment that requires new hotel construction to obtain special permits, almost 6,000 new hotel rooms are expected to open in the city in 2025, according to recent STR data.
The city’s luxury hotels are flourishing, Dandapani said, but the reduced competition hasn’t meant all hotels have become cash cows. Average revenue per available room in the city’s hotels was still $2 below 2019 levels when adjusted for inflation, he said.
“There’s a lot of distressed assets,” Dandapani said, adding that the distress is largely because of “leftover capital stack issues from prepandemic that have not been resolved.”
“The city’s hotel industry is not where it should be, as compared to other gateway cities,” he added.
Nevertheless, as dozens of migrant shelter contracts expire, the majority of owners will work to fix up their properties and reopen to guests.
“A lot of them took this business because they were due for a renovation,” Gosal said. “A brand-new, fully renovated property was not necessarily the first in line to take migrant business. But a Comfort Inn from 2005 that is now due for renovation was more likely to.”
Experienced owners likely have reserves to tap for renovations, and CMBS hotel loans typically require hotel owners to reserve 4% of their revenues for furniture, fixtures and equipment expenses, he said.
Owners of smaller properties, especially those with fewer than 100 keys and franchise agreements under select-service brands, will likely be able to get a line of credit to renovate. Gosal said he has toured several of those properties and found 90% to be in “fairly good condition.”
“The question mark really is what happens to larger assets like The Roosevelt,” he said. “I don’t know what the condition of a hotel like that even is from the inside.”
The famed hotel at 45 E. 45th St. still houses more than 2,800 migrants, The New York Times reported. It is owned by the government of Pakistan, which has tapped JLL to market the building to developers as a candidate to be torn down and replaced.
Many of the owners who signed contracts with the city were already in financial distress.
The owners of Row NYC, a 1,300-key Midtown Manhattan hotel that lenders were foreclosing on when it signed up to serve as a migrant shelter, put the property up for sale last year with an asking price of $350M.
The owner of the 50-story Holiday Inn at 99 Washington St. was in Chapter 11 bankruptcy when it signed a shelter contract with the city in 2023.
“The Holiday Inn in Downtown is a classic example,” Gosal said. “He was in distress. That’s why he took the business. The property was in financial trouble, and its physical condition was not very good.”
Jubao Xie, who developed the world’s tallest Holiday Inn with Sam Chang and later bought out Chang’s stake, turned over control of the property to his CMBS lenders in a bankruptcy plan approved last year.
When the migrant shelter contract expires in April, a court-approved “wind down officer” will be tasked with selling the property. If a new owner wants to use the Holiday Inn flag, it will have to submit a new application to the franchise’s owner, IHG, according to court records.
If a new owner were to invest and renovate to reopen as a hotel, the choices are either to put in minimal cash to create a budget offering or to put in more cash and create an upscale product, Gosal said.
“The cost of renovation to get 400-plus rooms online is going to be so massive that it’s not going to justify reopening as a Holiday Inn,” he said. “The midscale brands are in the crunch.”
Some owners have already embraced the idea that their hotels must become a different type of property. Sioni Group, which owns the 618-key Stewart Hotel in Midtown, which is among the shuttering shelters, filed plans in December to convert the building into housing.
In pockets of Midtown and Queens, where many of the shelters have clustered, the future looks even cloudier. With so many hotels potentially returning to the market at once, projecting demand and room rates has been a challenge for lenders.
“It’s very tough for these guys to gauge if suddenly 15 hotels open up back to normal use,” Gosal said. “What’s the new market dynamic?”
Anudeep Gosal