December 4, 2024 - Having emerged from the COVID-19 pandemic, New York City’s hotel industry has seen tourism return, with occupancy levels rising to pre-pandemic levels. However, the hotel industry continues to face challenges from all stakeholders, with the latest being in the form of a piece of legislation titled Int. 991-2024, otherwise known as the “Safe Hotels Act." Passed by the New York City Council on October 23, 2024, the Safe Hotels Act imposes licensing, staffing, and other requirements upon hotels operating in NYC. The legislation was originally met with backlash and underwent subsequent revisions. Passed in its revised form, the bill creates new uncertainties that hotel owners must now face.

Licensing requirement

The Safe Hotels Act requires each hotel to obtain from the commissioner a license effective for two years, which is unassignable. The commissioner has the ability to revoke an issued license. To do so, the commissioner shall issue to a hotel a written notice requiring a “condition” to be corrected within 30 days, and if not addressed to the commissioner’s satisfaction, the commissioner can revoke the license. The bill does not specifically detail the criteria that the commissioner can use to revoke the license. While the bill originally included terminology outlining a wide array of service disruptions that were seemingly implied to be able to affect a license’s status, later versions of the bill clarified that the disruptions would not be usable as a basis to revoke or otherwise interrupt the license. Bisnow previously pointed out that the bill allowed for “third-party triggers” that interfere with a hotel’s license and as such, this appears to remain an open matter.

Employment and staffing requirements

The Safe Hotels Act places restrictions on the hiring of “core employees,” which the bill defines as employees “whose job classification is related to housekeeping, front desk, or front service at a hotel.” Under the bill, each hotel that has at least 100 guest rooms must directly hire core employees and may not use subcontractors for these functions. The exception to this provision is that a single hotel operator may be retained to manage operations on the hotel’s behalf. This requirement, while relaxed, is still expected to significantly affect hotel operations, as many hotels, even accounting for the exclusions, use third-party providers to service functions covered by “core employees,” as defined by the bill.

The bill also imposes specific staffing requirements. Under the Safe Hotels Act, a hotel must staff the front desk at all times, though the current version of the bill adds a provision that allows a security guard to operate the front desk during an overnight shift provided the security guard has undergone human trafficking recognition training. Additionally, a large hotel, defined as a hotel with over 400 guest rooms, is also required to have at least one security guard on the property whenever the hotel is occupied by guests at any point.

Reactions

The Safe Hotels Act had support from the Hotel Trades Council, as well as other parties such as the NYC Police Benevolent Association. Ciara Long cited in a recent Bisnow article that proponents of the bill claimed that the measures in the bill will help a significant number of people estimated to be in human trafficking in New York hotels, and also that the bill will help crack down on the numerous criminal complaints made on hotels The bill, in addition to the requirements previously discussed, will also impose requirements for core employees to undergo human trafficking recognition training, as well to issue panic buttons to employees entering occupied guest rooms. Critics of the bill noted that hotels already have measures in place to obtain the levels of safety and quality that the Safe Hotels Act is intended to achieve.

Hotel owners remain concerned with how the bill will affect the ability to maintain operations, noting that they will face challenges in obtaining financing for their hotels, as lenders will hesitate to issue long-term mortgages when hotels are only licensed to be able to operate for two years at a time. While NYC is seen as one of the better opportunities for investing in and developing projects, the potential fallout of the bill goes against this sentiment. Investors and developers will be hesitant to invest in hotels within the city due to the licensing requirement, which they perceive as vague and ill-defined, as reported in Hospitality Investor. Likewise, hotel owners continue to feel uneasy at the possibility of the commissioner being able to revoke licenses using justifications that they feel are not sufficiently defined in the bill and the prospect of a hotel not being able to legally operate due to a potential revocation will deter future hotel projects.

Several industry groups mobilized in opposition to the bill when it was introduced. Shortly after the proposal of the bill, the American Hotel & Lodging Association issued a statement decrying the bill and continued to weigh in on the matter as later revisions were made. Bisnow reported that a separate group called the NYC Minority Hotel Association was created, representing almost 120 hotels and over 900 employees, asserted that the legislation will affect small-business owners the most. Another article reports that aseparate group called the Coalition for Hotel Subcontractors was formed, representing nine companies and over 5,000 subcontracted hospitality workers. Various hotel owners and workers hosted demonstrations in front of City Hall to protest the bill, according to Hotel Investment Today and the American Hotel and Lodging Association. While changes to the Safe Hotels Act have satisfied some of its opponents, there remain others steadfast in their opposition to the legislature, according to Jenna Walters in Hotel Dive.

Summary

The Safe Hotel Act imposes a license requirement renewable every two years, as well as employment and staffing requirements that hotel owners expect will significantly affect their ability to operate. Hotel owners now must consider how they may address critical functions to keep their hotels running.

How Citrin Cooperman can help

Citrin Cooperman’s Hotel and Lodging Industry Practice is skilled in helping clients assess options to drive growth and achieve their strategic goals. For more information, please contact Jen Hogencamp or info@citrincooperman.com.