by Konrad Putzier and Peter Grant, The Wall Street Journal, April 26, 2022
New York City’s Times Square is looking to rebound from its worst economic crisis by becoming more like Las Vegas.
Investors and developers are doubling down on tourism and entertainment venues while Times Square’s office towers remain largely empty during the day. A new hotel with an outdoor pool overlooking the theater district has been opening in stages since last year, while another hotel with a concert stage is set to open in 2023. A developer has proposed building Manhattan’s first casino in the entertainment district.
Times Square’s economy suffered more than that of any other New York City neighborhood in 2020. During the early months of the pandemic, its reliance on tourists and theatergoers was its biggest weakness. Hotels and retail businesses closed down as visitors stayed away. Crime rose.
Now, entertainment is re-emerging as a source of strength. Weekly Broadway attendance was at nearly 90% of its prepandemic levels in mid-April, according to the Broadway League, a trade association. Times Square’s hotel occupancy in March was about 80% of the March 2019 level, according to the Times Square Alliance, a business-improvement district. Meanwhile, office occupancy across Manhattan was at just 37% of prepandemic levels as of mid-April, according to Kastle Systems, which tracks keycard swipes.
That means Times Square is coming back faster than other parts of Midtown that are more dependent on office workers. The neighborhood’s increasing reliance on tourism and entertainment looks poised to continue, as new hotels and venues open while the popularity of hybrid work may mean fewer office workers come to the city for years to come.
“I hope that anyone who wrote obituaries for Times Square has an eraser,” said Tom Harris, president of the Alliance.
The success of Times Square’s recovery is crucial to the city as a whole. The neighborhood’s businesses employed around 66,000 people before the pandemic, according to the Alliance. Its economic output was equivalent to the city of Nashville’s in 2016, according to a study by consulting firm HR&A Advisors, and accounted for 15% of New York’s economy.
To regain that stature, it is turning to the Las Vegas Strip’s playbook.
New York state has a ban on new casinos until 2023, but Gov. Kathy Hochul wants to end it this year. New York City’s hotel union and casino operators are lobbying to bring a casino to the city, maintaining that these sites would create more jobs and tax revenue.
Office landlord SL Green Realty Corp. wants to build a casino near Times Square, Chief Executive Marc Holliday said recently. New York state is set to approve as many as three casino licenses for the city, and developers have pitched a number of locations.
“I think that the single best location for a license is Manhattan, and within Manhattan I feel the absolute best, most obvious, least impactful and most globally accepted area will be Times Square,” Mr. Holliday said during an earnings call last week. “So we are on that opportunity.”
A Hard Rock International-branded hotel opened on West 48th Street on Monday. It includes a two-story rock-star-themed penthouse suite, according to the project’s website.
TSX Broadway, a $2.5 billion hotel and retail tower that will feature a concert stage facing the square, is scheduled for completion in 2023. The project’s developer, L&L Holding Co., thought about altering the project during the pandemic’s early days, said managing director David Orowitz. “But it was pretty clear at the end of the day we were building what was going to continue to work,” he said. “Tourists were going to continue to come.”
Jamestown, the owner of One Times Square, the former headquarters of the New York Times and the location of the ball drop on New Year’s Eve, is expected to announce soon a major upgrade of the 26-story tower, according to people familiar with the matter.
For all the new activity, Times Square’s economy is still troubled. Fewer than 80% of the neighborhood’s businesses are open and six hotels are still closed, according to the Alliance. Many who signed leases before the pandemic are struggling to pay rent.
Josh Gatewood, owner of the Yankee Doodle Dandy’s fried-chicken food trucks, signed a lease to open his first restaurant near Times Square in late 2019. Because of the pandemic, he couldn’t open until December 2020. His store was robbed three times, he said, and drug dealers started selling near his front door. There weren’t enough tourists and office workers to help pay the bills, and Mr. Gatewood was forced to close for good last November.
Since then, Mr. Gatewood said the streets have filled up again. Cheaper real estate is bringing back business. The Planet Hollywood restaurant in Times Square closed in 2020 and never reopened, in part because rent and property taxes were too high, said owner Robert Earl. But Mr. Earl has since found a substantially cheaper space on 42nd Street, where he plans to open a new Planet Hollywood restaurant in late 2022.
Some investors are also buying Times Square hotels at bargain prices, betting they can turn a profit when more tourists return. MCR and Island Capital Group LLC last week said they paid $373 million for the Sheraton New York Times Square hotel—about half the price the property last sold for in 2006. MCR’s CEO Tyler Morse said he expects a surge in demand for tourism and entertainment in the wake of the pandemic.
“People want to be with other people,” he said.
Write to Konrad Putzier at [email protected] and Peter Grant at [email protected]