Many hotels have hung on, but pandemic’s true impacts could be felt soon
When Toronto’s Major League Soccer team selected Pratt & Whitney Stadium in East Hartford as its temporary home field to avoid COVID-19 international travel restrictions, one beneficiary was downtown Hartford’s Goodwin Hotel.
The historic 124-room property, renovated and reopened in 2017, this fall housed Toronto FC athletes and staff, who filled about half of the total rooms. It was a godsend during an otherwise dismal time for hotels here and across much of the country, according to Charles Mallory, founder and CEO of Greenwich Hospitality Group, which co-owns the Goodwin with RMS Companies.
“It was a very, very lucky and welcome piece of business,” said Mallory. “Had it not been for that, the occupancy of the Goodwin, and I think virtually all of downtown Hartford, would be in the single digits.”
City hotels, which rely on business group travel and conventions, have been hit particularly hard during the pandemic, Mallory said.
The broader Hartford-area hotel market, as defined by hospitality industry analytics firm STR, has seen occupancy levels down 40% or more, and revenues down 55% or more in September and October.
At least one hotel — Homewood Suites on Asylum Street — has closed permanently, while three other distressed properties in the region have gone up for sale.
Greenwich Hospitality’s portfolio contains luxury properties that offer extra indoor and outdoor space and amenities, such as the Delamar West Hartford and various Fairfield County properties, and as a result it hasn’t seen its revenues and occupancies fall as steeply as its peers, Mallory said.
“If you’re a hotel that has a dining component and in particular an outdoor dining component, you might have done better than you expected this year, although no one has really come close to where they were in 2019,” he said. “The bar is so low, it’s just a question of how far above that bar you are.”
The occasional booking windfall won’t be enough to save the broader hospitality industry, which is lobbying hard in Washington, D.C., for a major stimulus package, and warns if it doesn’t come the result will be catastrophic.
A survey released this month by the American Hotel & Lodging Association (AHLA) found that 71% of hotels would not last another six months without additional stimulus.
AHLA has also projected that Connecticut, which has already lost nearly 10,000 of its 26,000 hotel jobs as of September, would see those losses climb to more than 18,000 job losses if aid does not arrive. The state could also see two-thirds of its 367 hotels close, many of them through foreclosure, the association projected.
Now more than eight months into the pandemic, many hotels have stayed afloat through a combination of federal CARES Act stimulus money and flexible lenders, according to Gary Avigne, a senior advisor with Boston-based Pinnacle Advisory Group.
Avigne has been helping banks and other lenders negotiate loan restructuring packages, or workouts, with hotel borrowers.
“Lenders are trying to be cooperative and even collaborative,” Avigne said.
However, barring significant improvements, such as additional federal aid or quicker-than-expected rollout of COVID-19 vaccinations, there could be more pain starting in March or April 2021, when the pandemic marks its one-year anniversary, Avigne said.
“At the end of the day, banks have to make money too, so they may only be able to go so far with what they can do,” he said.
Foreclosure not an ideal option
Avigne said many lenders would prefer not to foreclose on hotels, especially during a period when they may not be able to sell the properties for much, if at all.
Hotel auctions have been rising in number across the country, according to Ten-X, the largest virtual auctioneer of commercial property in the U.S.
“We’re seeing a significant amount of retail assets and hospitality assets on the platform and I think that’s not surprising because those classes have been probably most significantly impacted by COVID,” said Kevin Spellacy, executive director of sales at Ten-X.
A recent indication of soft hotel demand was seen locally via the failed auction sale of the 22-story Hartford Hilton.
Photo | CoStar
The Hartford Hilton hotel failed to sell via auction in November.
It was unable to garner a buyer in an online auction earlier this month, even with a relatively low starting bid price of $5.5 million.
The owner, Waterford Hotel Group, said it’s still talking to interested parties about a deal, but Mallory said the situation could be telling about the kinds of hotels the market will want in the coming years.
“No one felt it was worth taking a punt on at even a nominal price,” said Mallory, whose group competes for downtown business with the Hilton. “Maybe the hotel is obsolete, maybe the work that needed to be done to make it more viable in today’s market is a large number.”
Michael Freimuth, executive director of the Capital Region Development Authority, which manages the Hartford Marriott Downtown, said the Hilton sale has lots of moving pieces, including a tax agreement that must be negotiated with the city, not to mention uncertainty over the future of the nearby XL Center.
“I’m speculating, but I’m guessing it’s a lot more complex than a hotel off the highway,” Freimuth said of the Hilton.
Meanwhile, the Sheraton Hartford South hotel in Rocky Hill heads to auction on Ten-X in December.