Modest increases in travel
Opening a new high-end hotel during a pandemic that has wreaked havoc on the nation’s travel industry might not be the best timing.
But, that’s where Vik Khokhar finds himself as general manager of the Renaissance Milwaukee West Hotel, the area’s newest hotel.
The 196-room Renaissance has been operating with half the staff it had expected to employ since launching in August at 2300 N. Mayfair Road, Wauwatosa.
Meanwhile, developer Joel Lee is proceeding with the conversion of a historic downtown Milwaukee office building into a boutique hotel with around a dozen rooms.
“The pandemic isn’t going to last forever,” said Lee, who expects the Adams Hotel, 790 N. Jackson St., to open in spring.
Milwaukee area hotels have been severely affected by the COVID-19 pandemic, which has caused occupancy rates to plummet at properties nationwide.
Some hotels, including such signature properties as downtown’s Pfister Hotel, 424 E. Wisconsin Ave., were forced to shut down for months starting in March when the pandemic surfaced in Wisconsin.
Lately, the state has been hit with a resurgence of coronavirus cases, which has landed Wisconsin among the country’s pandemic hot zones.
That means more burdens for Milwaukee area hotels, including those just opening, as they prepare for winter — already a traditionally slow period for Wisconsin travel.
And that comes as lenders are less willing to continue allowing hotel operators to miss debt payments, said Doug Nysse, principal at Arrival Partners LLC, a Menomonee Falls-based hospitality industry consulting firm.
“We’re hitting the end of that leeway,” Nysse said.
Occupancy sharply down
Through September, the 2020 occupancy rate of Milwaukee area hotels was 37.8%, according to STR Inc., a Hendersonville, Tennessee-based hotel industry data provider.
That compares to a 67.6% rate from the same period in 2019.
The average daily rate for Milwaukeearea hotels was $89 for the first nine months of this year. That compares to $116 from the year-earlier period, according to STR.
That adds up to huge revenue declines.
The hardest hit properties include full-service hotels, with large restaurants and meeting rooms, said Greg Hanis, a hotel industry consultant.
Such hotels, including the Milwaukee Marriott Downtown, 625 N. Milwaukee St., and the Hilton Milwaukee City Center, 509 W. Wisconsin Ave., require a lot more employees than mid-tier limited service hotels such as the Hampton Inn, Aloft and Holiday Inn Express chains.
Also, those full-service hotels are much more dependent on hosting weddings, corporate meetings and other events for their revenue, said Hanis, who operates New Berlin-based Hospitality Marketers International Inc.
The pandemic has destroyed the group business, he said.
“Nobody wants to get together in a big group for fear of what might happen,” Hanis said.
There have been some modest demand increases from both leisure and business travelers who drive, not fly, to their destinations, Nysse said.
But this winter could be a grim season, with some hotel operators fighting to stay open for what they hope are better days when the weather gets warmer, Hanis said.
“The essence of the hotel industry is: can they survive to get to April or May of next year?” Hanis said.
“Then, maybe the cash will start flowing again,” he said. “People want to travel.”
Some hotels could end up defaulting on their loans, with the properties’ ownership transferred to their lenders, Nysse said.
That actually happened with two prominent Milwaukee-area hotels in 2019 — nearly a year before the pandemic hit Wisconsin.
Both the Hampton Inn and Suites, 176 W. Wisconsin Ave., and the Sheraton Milwaukee Brookfield Hotel, 375 S. Moorland Road, Brookfield, changed ownership through deeds in lieu of foreclosure, according to state real estate records.
Other hotels at risk of defaulting on their debts are older, larger properties — which Nysse calls “dinosaurs.”
He also expects some hotel projects that were planned before the pandemic to not proceed.
That’s already occurred with the proposed conversion of the former Humphrey Scottish Rite Masonic Center, 790 N. Van Buren St., into a highend hotel with up to 220 rooms.
Madison-based Ascendant Holdings LLC has that project on an indefinite hold, and is listing the historic building for sale.
Also, plans have been dropped to create a 96-room boutique hotel as part of the redevelopment of the Milwaukee Athletic Club, 758 N. Broadway. That’s being replaced by apartments.
Other local hotels have had the misfortune of debuting amid the pandemic.
“It’s certainly not the ideal conditions,” said Khokhar.