Hotels planned for Long Island not enough to meet growing demand, experts say

Patchogue Village’s nearly two decades-long downtown revitalization plan has included hundreds of new apartments, townhouses and dozens of restaurants and stores but the South Shore village has lacked a hotel.

That’s about to change.

A developer plans to build a $35-million luxury hotel-apartment at the site of a shuttered bowling alley in the village, which would make it the only hotel south of Sunrise Highway in Suffolk County, Mayor Paul Pontieri Jr. said recently.

The five-story, 96-room Tempo, an upscale Hilton brand, which was downsized after concerns about excessive traffic and parking shortages, would be the capstone of Patchogue’s redevelopment efforts, which included the creation of a “floating” hotel zone in January 2024 to attract hotel projects and boost tourism to nearby locales. 

“It creates energy here in the village that we haven’t had, bringing people to stay, taking advantage of the Fire Island National Seashore being in our community, giving those residents who decided to move into the apartments and the townhouses a place to put their families when they come to visit,” Pontieri said. 

Patchogue is among municipalities on Long Island that are eyeing hotel projects as key to their downtown revitalization plans, while developers are looking to take advantage of growing customer demand for hotel rooms, according to developers and industry experts. 

Hotel construction on Long Island and nationwide has stalled over the past few years partly due to the COVID-19 pandemic and high interest rates, but at least 10 hotels are under construction or in the planning stages on the Island, where growing leisure travel is helping drive demand for hotel rooms, experts said.

Most projects “have been in the works for a while,” said Dorothy Roberts, president of the Long Island Hospitality Association, an East Northport-based trade group of hotels, catering halls, restaurants and other tourism-related businesses.

Some of the demand also is tied to New York City, experts said.

“When you can’t get a hotel room in New York, it radiates out to Queens, Nassau and Bergen County [New Jersey],” said Daniel H. Lesser, co-founder and president of LW Hospitality Advisors. The Manhattan-based firm conducts market studies for developers considering building hotels on Long Island and elsewhere.

On Long Island, the number of hotels grew 25% to 258 and the number of rooms increased 16% to 17,636 between 2015 and 2024, according to CoStar, a commercial real estate data company in Washington, D.C. CoStar’s hotel data is mostly focused on chains.

Not only did Long Island’s increases over that nine-year period exceed the U.S.’ — nationwide, the number of hotel properties grew 5.4% to 62,811 and the number of rooms grew 9.7% to 5.6 million — but also the Island’s average occupancy rate last year topped the national average, 72.4% compared with 63%.

Among the top 25 hotel markets nationwide, New York City had the highest average occupancy rate last year, 84.3%, and it ranks first for the most new rooms that will be added to its inventory this year, an additional 5,719 rooms, according to CoStar.

‘We don’t have enough rooms’

Despite the 25% increase in hotels on Long Island in recent years, it’s not enough to meet growing customer demand for lodging, industry experts said.

Among the 11 regions of New York state, Long Island had the second-biggest increase in visitor spending, which grew 12.7% to $7.5 billion, from 2022 to 2023, according to a state tourism study released in August by Tourism Economics, a Wayne, Pennsylvania-based company.

Lodging accounted for 20% of that spending, the study found.

That spending puts the region on par with major tourism destinations, such as Tampa Bay, Indianapolis, Dallas and Washington, D.C., all of which have far more hotel rooms than Long Island, said Kristen Reynolds, president and CEO of Discover Long Island, which markets the region.

With about 18,000 hotel rooms on Long Island, “we still have very low inventory of hotels based on the demand that we have,” Reynolds said, adding that sometimes the tight inventory benefits Long Island hotel operators by allowing them to drive higher rates.

Long Island also lacks a convention center — it has only a few hotels that can accommodate large meetings, for 300 or more people, so it loses out on revenue, Reynolds said. 

In the last several years, “We turned away over $35 million worth of business of people that just call us,” Reynolds said. “This is business that we’re trying to attract, and then we don’t get it,” she said, citing as an example the 2025 Ryder Cup, the men’s golf tournament that will be played at Bethpage Black Course in Bethpage State Park in September. 

“We have over 12,000 rooms on Long Island booked for that, but the majority of people coming are going to stay in New York City because we don’t have enough rooms,” she said. 

The Ryder Cup is estimated to generate more than $10 million in Long Island hotel revenue, excluding Airbnb’s and other short-term rentals, according to Discover Long Island. At least 250,000 spectators are expected to attend during the week in September, according to the organization. 

‘Driving the demand’

Long Island’s growing demand for hotels is fueled by several factors, including the region’s developed areas, dense population, high number of college students, with visiting relatives, and corporate offices that draw clients from out of town, hospitality experts said.

From 2010 to 2023, Nassau County’s population grew by 42,183, or 3.14%, to 1.4 million residents, while Suffolk County’s population grew by 29,820, or 2%, to 1.5 million residents, according to the most-recent data from the U.S. Census Bureau. 

The Island also is connected to highway systems, has hundreds of retail stores and restaurants, is close to major airports, including Kennedy and LaGuardia, and Long Island MacArthur in Ronkonkoma, said Rod Clough, president of HVS Americas, a Loveland, Colorado-based consulting firm for the hospitality industry. The firm conducts market studies for developers considering building hotels on Long Island and elsewhere.

“Central [Long Island] is driving the demand. It’s a strong economy unto itself,” he said.

Long Island has a stable hotel market with strong demand generated from weekend leisure travel to beaches, weddings, historic sites and sporting events, but more corporate offices are needed to help fill hotels mid-week with business travelers, Roberts said.

Long Island’s high cost can be prohibitive to attracting corporate offices, she said.

“It’s expensive to develop something here. When you want to attract employees, it’s difficult because of the [expensive] housing situation,” she said.

On Long Island, the number of hotels grew 

25% to 258

and the number of rooms increased

16% to 17,636

between 2015 and 2024, according to CoStar

Even with the increased number of hotels on Long Island, growth has been constrained locally and nationwide, experts said.

Last year, no new hotels opened on Long Island, and there was a less than 1% increase in new properties nationwide, CoStar said.

“Long Island has historically been, for the most part, a high barrier-to-entry market for new hotels,” for reasons, including high land costs, high construction costs and difficulty obtaining construction loans, Lesser said.

Nationwide, restrictive lending and high interest rates deter developers from taking on hotel projects, Isaac Collazo, senior director of analytics at Nashville hospitality data firm STR Inc., said in a statement Feb. 7.

But Long Island hotels perform well enough — in terms of high occupancy and room rates —  and a well-equipped developer can work around barriers, Clough said. 

“A good developer is able to get a project across the finish line if the hotel site is exceptional, the right brand for the submarket is chosen, they have experience building that brand and have brand relationships and approvals,” he said. “They are able to construct the hotel at a low enough cost that supports its feasibility,” he added. 

Hotel projects are growing in popularity with investors who want to put their money into tangible assets, such as land, commercial buildings and homes, said James Manicone, senior manager at JM2 Architecture DMC, the Farmingville firm that designed plans for the Tempo by Hilton in Patchogue and other hotels on Long Island.

“With the stock market fluctuations being what they are, investors want … something that they know is going to get them that return. And certainly the hospitality, the restaurants, the bars … the rooftop restaurant, things like that are going to draw people,” he said.

A niche for high-end hotels

Municipalities like Patchogue that are incorporating hotels into their economic revitalization plans are tying them to new housing in their downtown areas to attract younger residents, Manicone said.

“Millennials want to be very transient. They don’t want to buy an old house. They want to be able to come and go freely” he said.

Among the hotels planned for Long Island are The Ferncliff, a high-end, 299-room building that will be built at 125 Spagnoli Rd. in Melville. The Town of Huntington’s planning board approved the site plan for the $200 million project in March, and construction on the 427,173-square-foot hotel is expected to start this year and finish in 2027, said Steven Dubb, a principal at the Beechwood Organization, the Jericho-based developer.

The hotel will have 35 rooms intended for short-term stays, while the rest of the rooms will be for a mix of visits ranging from a few days to more than a month, he said.

Long Island had the second-biggest increase in visitor spending, which grew 

12.7% to $7.5 billion

from 2022 to 2023, according to a study by Tourism Economics

Beechwood also has built two high-end apartment-hotels in Westbury — The Vanderbilt for $100 million in 2018 and The Selby for $130 million in 2022. They both have a mix of traditional hotel rooms and apartments for rent under long-term leases of 12 or 24 months.

Beechwood, mostly known as a developer of housing for purchase, is entering a new niche with high-end hotels, Dubb said.

“Long Island has a lot of hotel products. There’s a lot of lower-end and mid-market hotel product. There’s not a lot of luxury or super-luxury product,” said Dubb, adding that the Vanderbilt continually outperforms nearby hotels that are cheaper. 

The Tempo in Patchogue also will include 13 apartments, a bar, indoor and rooftop restaurants, and a spa in a waterfront area of Patchogue that used to have industrial businesses. The hotel’s construction should be done by July 2027, Manicone said. 

The hotel developer, West Avenue Partners LLC, is the first applicant to use the village’s “floating hotel district.”

An upscale hotel planned in Jericho Plaza will cost an estimated $85 million to $95 million to build and will either be named an Autograph by Marriott or Curio by Hilton.

Ground will be broken on the 182-room, 113,800-square-foot hotel in spring 2026 and the project should be done by late 2027, said Roberts, who is also vice president of operations and development for Oxford Hospitality, USA, a Jericho-based company whose seven hotels include the Hilton Garden Inn Melville and the Hilton Garden Inn Roslyn in Port Washington.

Oxford is the lead in a partnership that is developing the Jericho hotel and the $20-million Hampton Inn & Suites in East Farmingdale, which is expected to be finished by July at 1024 Broadhollow Rd. on the former site of the Skydrive Golf Center.

Tax breaks make projects ‘feasible’

Those two Oxford projects, like most hotels that are built on Long Island, are receiving tax breaks from county or town industrial development agencies in exchange for promising to create jobs.

The Nassau Industrial Development Agency in 2022 awarded the developer of the Jericho Plaza hotel project 22 years of property tax breaks, as well as a sales-tax exemption of up to $2.6 million on the purchase of construction materials and supplies and up to $294,000 off the mortgage-recording tax for promising to create 52 jobs.

“Attaining IDA approval helps to make a project feasible,” Roberts said.

The Babylon Industrial Development Agency authorized tax benefits for the East Farmingdale project estimated to be worth $6.59 million over 20 years, IDA documents show. The hotel is expected to employ 16 full-time workers and open around July 2025, Roberts said.

The Nassau County IDA said that Oxford’s Jericho Plaza project is the only hotel development that it has provided tax breaks to since 2020.

Newsday filed a Freedom of Information Act request with the Suffolk County IDA on Jan. 31 seeking information about the tax incentives it has provided for hotel projects since 2020.

Because hotel developments require a significant amount of private investments, IDA benefits have become more crucial to projects, Manicone said. 

On Long Island, where towns’ building approval processes can be lengthy, IDAs can help move projects along more quickly “because they know we’re trying to bring economic growth to a municipality,” he said.

Since 2018, Suffolk County had been planning the $2.8 billion Midway Crossing project, which would have included a 352,500-square-foot convention center; a 300-room hotel; and a health sciences facilities on 179 acres of county-owned land in Ronkonkoma.

The project also would have included a new air terminal at MacArthur Airport, and a walkway connecting the airport and the Ronkonkoma LIRR train station.

Last month, County Executive Edward P. Romaine’s administration announced it was canceling the redevelopment plan and removing Chicago real estate firm JLL as the master developer, saying the firm had failed to make significant progress toward hiring staff and arranging financing for the project.

Two days later, Romaine said the county would contribute an additional $50 million to redevelop the property and begin soliciting new ideas for the redevelopment of the Midway Crossing site in a few weeks.

On Feb. 12, Gov. Kathy Hochul announced that the state will spend $150 million to connect the Ronkonkoma LIRR station with a proposed, but yet-to-be-built, northern terminal at MacArthur Airport. 

The governor’s announcement did not signal the launch of new development plans at Midway Crossing, county spokesman Michael Martino said.

The county executive “will listen to the community to determine how to move forward,” he said.

Successful convention centers typically lead to more developments of hotels, and that could be the case for Long Island, too, Reynolds said.

“However, that would only come after years of proven success and demand for the additional rooms [and] development,” she said.

With Carl MacGowan