By Kate King

New York City's hotel owners last week signed the industry's most expensive union contract ever. Travelers to the city will be paying for it.

The new agreement allowed hotel owners to avoid a punishing strike by union workers on the eve of FIFA World Cup kickoff next month. The deal hikes hourly wages for most hotel workers by about 50% over eight years, with housekeepers set to earn six figures by 2032.

Rising labor and other mounting expenses will push up hotel owners' annual property-operation costs by an estimated 15%, according to the Hotel Association of New York City.

New York City already has the most expensive hotel rooms in the country among nonresort markets, with the average daily rate having reached $334 last year, according to CoStar, a data firm.

Now, the price is sure to go even higher. Hoteliers are betting that visitors to the city are willing to cover those costs as most Americans and foreign visitors are already feeling squeezed by rising fuel and other expenses.

"The only way to maintain your profit when your costs go up is to keep raising your rates," said David Sherwyn, a Cornell University professor and director of the Cornell Center for Innovative Hospitality Labor and Employment Relations. "The question is what is the appetite for raising the rates."

New York hotel owners' expected boost from the World Cup, meanwhile, is shaping up to be a disappointment. As of mid-May, the occupancy rate for New York City hotels in June, when the tournament begins, was about 12 percentage points below where it stood for that period last year, according to CoStar. The metropolitan area will host eight matches including the championship final.

That level of interest is probably due in part to other business and leisure groups that are avoiding the city in anticipation of large crowds linked to the World Cup, said Jan Freitag, national director of hospitality analytics for CoStar. Others said some of the highest ticket prices ever for a sporting event are turning off fans

New York's luxury properties are unlikely to meet too much resistance from their wealthy customers when increasing room rates. Affluent travelers have continued to splurge on accommodations despite rising prices, Sherwyn said.

The question, he added, "is whether the midlevel or lower-level hotels can afford the contract."

Lower-income households were already feeling squeezed and spending less on airlines, lodging and other travel-related expenses this year as of the end of April compared with the same period in 2025, according to credit- and debit-card spending analyzed by Bank of America Institute.

The commitment of middle- and upper-income Americans to their vacation plans benefited New York City this spring, when hoteliers saw a pullback by international travelers at the start of the war with Iran.

Domestic travelers have helped bridge the gap at Fitzpatrick Hotel Group's two Manhattan properties since March, according to the owner, John Fitzpatrick. International travel to his hotels has fallen 12% since the start of the war.

Hoteliers prize international guests because they tend to stay longer and spend more than domestic travelers. After growing steadily for several years, international tourism declined 3% last year compared with 2024, according to New York City Tourism and Conventions, the city's official destination-marketing organization.

Todd Orlich, chief operating officer at the boutique hotel brand Triumph Hotels in Manhattan, said international travel bookings are starting to pick up as anxiety over the war with Iran moderates.

"When there's a lot going on in the news, I think travel tends to take a bit of a dip," he said. "I also feel that it's getting better."

Several other factors threaten to knock New York's international tourism recovery off course. Rising fuel costs related to the war with Iran are pushing up plane-ticket prices and forcing some airlines to cancel unprofitable flights. Some travelers remain concerned that they will be stopped at the border or that Customs officials will ask to search their phones or social-media accounts.

Sky-high ticket and transportation prices are taking the wind out of the heavily anticipated FIFA World Cup games, which officials expected would draw 1.2 million visitors to New York and New Jersey.

Fitzpatrick tried to work with tour operators in Ireland and England to put together a four- or five-day package for guests that would include World Cup tickets, airfare and rooms at his hotel but said match tickets made it unaffordable. He said he is now expecting to sell rooms at his usual summer rate during the World Cup.

CoStar's Freitag said he expects World Cup bookings to pick up for July, when the later-round matches are scheduled, once it becomes clear which teams are advancing.

New York City's current hotel occupancy during the World Cup period, at 32%, might have missed expectations, but it is still the strongest among the U.S. markets hosting games, he said.

Write to Kate King at kate.king@wsj.com

(END) Dow Jones Newswires

May 27, 2026 05:30 ET (09:30 GMT)

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