Area hotels grow more desperate
West Houston hotel lobbies bustled with oil and gas executives. Conventiongoers spilled out of downtown’s Marriott and Hilton next to the George R. Brown Convention Center. Luxury properties in Uptown hosted Mexican nationals in for the weekend to shop at the Galleria and dine at posh steakhouses.
Before 2020, no one who worked in the hospitality industry could predict what was about to hit.
Hotels across Houston, the energy capital of the world, that thrive on corporate travel and big conventions are in a pandemic-induced tailspin. Nine months into the coronavirus pandemic, owners are facing seemingly insurmountable financial strain. Some are on the verge of losing their properties to foreclosure, an expected turn for an industry that’s arguably been the hardest hit.
At the same time, thousands of Houstonians who make their livings cleaning guest rooms, preparing and serving food andworking behind the front desks of local hotels are out of work. The sector lost 9,100 jobs in March and April — about a third of all hotel jobs in the region. Some 5,900 people are still out of work, according to the Greater Houston Partner
ship.
Unite Here Local 23, the union that represents hotel and other hospitality workers, said around 90 percent of its members have been laid off since the pandemic began. Most of them lost their health care.
“If you’re a hospitality worker or a food service worker at the airport or in one of Houston’s hotels, it’s been a really hard year,” said Local 23 Senior Political Organizer Bo Delp.
The pain comes as hundreds of meetings and conventions have been canceled since March, affecting half-a-million room nights with an economic impact of $330 million to the city— a conservative estimate, according to Michael Heckman, acting president of Houston First Corp., the city’s convention and visitors arm. The hit has come from declines in hotel revenues, food, beverage and retail spending, sales taxes and other conventionrelated sales.
“It’s a historic disruption of our tourism industry,” he said in a recent board meeting.
Drastic measures
Desperate to fill beds, operators are drastically discounting rates and some are pitching rooms by the day as a work-fromhome alternative.
Occupancy at Hilton Americas, downtown’s 1,200-room convention center hotel, has been averaging in the mid-20 percent range, said Jacques D’Rovencourt, general manager of the city- owned hotel. That’s an improvement from early in the pandemic when it fell into the single digits. Pre-COVID levels were above 70 percent.
Houston First, which anticipates a $55 million loss in 2021, said it has approximately $154 million in Hilton-specific bond debt, which is secured by parking and hotel operating tax revenues, plus an additional $124 million loan secured by the hotel. It is is current on all of its payments, officials said.
The Hilton has started offering 50 percent off its cheapest daily rates for customers who want to book a room for the day to use like an office. The “WorkSpaces” package includes an extra computer monitor, power cords, hand sanitizer and access to the hotel’s pool and fitness center.
Hotels around the region are luring guests with similar packages, as well as food and beverage credits, museum tickets and free champagne.
Aside from the losses related to a lack of business travel and big conventions, hotels are losing revenue from smaller events, too.
“Ballrooms aren’t being booked for wedding receptions or proms. Meeting rooms are going unused for training sessions and business retreats. Conference rooms aren’t being used for awards ceremonies or local trade shows. It all adds up,” said Patrick Jankowski, senior vice president of research at the Greater Houston Partnership.
After the pandemic hit, business essentially vanished overnight andmany hotel owners had no option but to close their doors and lay off employees. More than 40 properties across Houston closed temporarily, according to STR, a hospitality research firm.
Someof theworkers have been called back to their jobs. But limited business means fewer hours.
Bill Guillen, furloughed from his job as a communications operator at Hilton Americas in March, went back to work at the end of August, but he’s needed
there only three days a week.
“At the end of the day we all want to go back to work,” said Guillen, who has worked at the Hilton since it opened more than 16 years ago. “The hotel is doing the best they can do.”
He has been looking for fulltime work, but hotel jobs are few and far between. Meantime, he’s using credit cards and his small unemployment checks to pay the bills. “It’s hard just to stay afloat, but I’m grateful they’ve calledme back three days.”
Debt crisis
Owners of many of the bigger hotels are operating on the financial edge. In the Houston area, just under $1billion of hotel mortgages are packaged into securities. The delinquency rate for those loans is 76 percent, according to securities data company Trepp. Nationally, the rate is 19 percent.
A $36.7 million loan for the Sheraton Suites on theWest Loop became delinquent over the summer. Wedge Group, the owner of the 283-room hotel, is in the process of working out a deal with its lender, said Brett Scholz, Wedge’s president and CEO. Others just can’t keep up.
The owner of the 301-room
Marriott Galleria is in default on a $30.4 million loan, according to SEC filings. The last paymentwas made in March.
Newport Beach, Calif.-based Clearview Hotel Capital, which owns the hotel, did not respond to requests for comment.
The $76.2 million loan on the 448-room Hilton on Post Oakwas recently transferred to a special servicer for “imminent monetary default” at the borrower’s request as a result of the COVID-19 pandemic. The collateral had fallen to $57.5 million.
A spokesperson at the hotel declined to comment.
Seeking relief
At his newly opened BestWestern near Bush Intercontinental Airport, Miraj Patel has been watching the skies for an indicator of where the market is heading. Early in the pandemic, Patel, who just opened the 52-room hotel near the intersection of U.S. 69 and Will Clayton Parkway, would stand outside during construction and count the planes flying overhead.
Now he’s waiting for another COVID-19 relief package. The first helped early on, but for many it has not been enough.
The hotel industry will continue its downward spiral without additional relief from Congress, according to the American Hotel & Lodging Association, the industry’s trade group.
The association recently released a survey that showed more than two-thirds of hotels will be able to survive only another six months without further financial assistance at current and projected travel demand. More than half of hotel owners said they are in danger of foreclosure by their lenders due to the coronavirus.
Houston’s hotel market isn’t expected to recover for at least three years, Marc Sallette, a senior vice president and finance specialist with CBRE Hotels, forecasts. That’s a year after the national market is expected to rebound.
When it does return, the hotel experience most people are used to will be different.
At Hilton Americas, for example, room service has been suspended. When it resumes — likely sometime next year — the food will be served in special packaging and it won’t be rolled into the room on a tray. The order will be charged automatically to the guest soasignature will not be required at the door.
While the Post Oak Hilton was quiet on a recent Wednesday night, the bar was open. The drinks listed on the cocktail menu were standard fare for the typical business traveler or conferencegoer: a martini, an old fashioned, a sweet rum cocktail called “Island Time.” But one drink stood out, likely a recent addition as hotels pivot their marketing strategies amid COVID“The Staycation.”