The Register Citizen (Torrington, CT)
Travelers still in hibernation, hotels brace for long winter
“Lenders have been fairly patient — now you and I both know it’s just a question of time. How long does this go? And I think hopefully — fingers crossed — that you start to get closer and closer to a way where you can start to see the path out of this.” Marriott CFO Leeny Oberg
As the Hilton Hartford hotel heads toward auction in two weeks and others close in Stamford and New York City, Connecticut’s leading economic official indicated the state has no plans for a bailout of the industry during the COVID-19 pandemic.
After nudging north of 50 percent room occupancies in mid-October, U.S. hotels dipped back below that threshold last week according to STR, a market research firm based in Tennessee.
Throughout the pandemic, Connecticut hotels have had higher occupancy than New England as a whole, STR data shows, but well below historic norms. Over the first five full months of the pandemic between April and August, however, Connecticut hotel room revenue was down 66 percent from the same stretch in 2019, according to tax receipts on room reservations collected by the Connecticut Department of Revenue Services.
While travelers know hotels by the “flags” managed by big companies like Marriott International, Wyndham Worldwide and Choice Hotels, the venues themselves are owned by smaller independent operators, many of which owning dozens of lodgings. Those owners often take out mortgages on the buildings to pay for renovations and new amenities to freshen their appeal, opening the possibility of foreclosure sei
zures if they cannot make payments.
In late September, the American Hotel & Lodging Association published survey results that — extrapolating the data to Connecticut — suggested the state could see nearly 250 hotels closing of 370 statewide. More than 180 of those could come as a result of lenders initiating foreclosures on mortgages for which hoteliers lack revenue to make payments.
With airlines, hotels and cruise ships continuing to lobby Congress for industry bailouts, Connecticut’s head economic official indicated no state aid is in the offing. To date, Gov. Ned Lamont has authorized modest relief packages for small businesses and nonprofits, as well as the Mystic Aquarium which the state bailed out in September as it faced $14 million in loans on the books.
“The state doesn’t have the financial wherewithal or the ability statutorily to ‘deficit finance,’ ” said David Lehman, commissioner of the Connecticut Department of Economic and Community Development. “When you look at the numbers for the hospitality industry or beyond that, the numbers get so big. … The magnitude of the need is so great, it’s beyond what the state can do.”
‘Grind their teeth and get through’
Last week, People’s United Financial executives disclosed that Northeast hotelier borrowers had kicked the can on $640 million in loan payments coming due — for a second time since the start of the COVID-19 pandemic. The payments on pause amounted to 60 cents on every dollar owed, of a $1.1 billion hotel industry loan portfolio held by People’s United.
People’s United did not disclose the location of hotels that are in arrears, except to say that 94 percent of the loans are outside of New York City. The bank has branches in Connecticut, New York, Massachusetts, Vermont, New Hampshire and Maine.
“The hotel industry has been significantly impacted by the pandemic — (the) severity of the impact varies by property influenced by many factors, including hotel type, primary customer base and location,” said People’s United CEO Jack Barnes, during a conference call. “The challenges faced by this industry will likely extend into next year; as such, we expect to offer modifications to most of our hotel customers after their deferral period ends.”
Some Connecticut hotels had already been dragged down in recent years by overhanging debt on the properties, including the Stamford Marriott Hotel & Spa and Doubletree Norwalk by Hilton Hotel. A union representing Sheraton Stamford workers indicated the East Main
Street hotel would close by the end of October, with the owner to convert it to apartment housing.
Booking Holdings, a global barometer of the travel industry via its websites like Booking.com and Priceline, saw room reservations plummet 87 percent between April and June. The Norwalk-based company is set to release next week fresh data from the latter half of summer.
Marriott International’s chief financial officer told analysts in September that the chain was already seeing signs of recovery in U.S. venues carrying Marriott-owned flags, which include Courtyard by Marriott, Residence Inn, Sheraton and Springhill Suites.
“You’ve got the large institutional owners … who, frankly, typically have pretty decent access to capital and to cash and the ability to kind of grind their teeth and get through this,” said Marriott CFO Leeny Oberg, during a hospitality industry forum hosted by JPMorgan Chase. “Then you’ve got more of the … hotel owners where they may have three franchise, limited-service hotels kind in several places around their particular region.
“Lenders have been fairly patient — now you and I both know it’s just a question of time,” Oberg added. “How long does this go? And I think hopefully — fingers crossed — that you start to get closer and closer to a way where you can start to see the path out of
this.”
Hoteliers remain hopeful that that path will be paved with federal fundings. In mid-October, Marriott CEO Arne Sorenson joined a dozen peers from other major chains in asking President Trump to funnel to hotels hundreds of billions of dollars in untapped funding in the Main Street Lending program, a U.S. Department of the Treasury loan program that has gotten few takers. And the U.S. Senate is considering a bill that would create tax credits on expenses by businesses in sending their employees to conventions, among other measures to get corporate travelers back on the road.
But it appears likely that other venues will join the Stamford Sheraton in going dark, with the possibility of new uses alongside some office buildings as employers make permanent some remote working arrangements.
“What is going to tbe the structural change? I think we need to adapt to that — that’s something that you just don’t throw money at,” Lehman said. “I think you are going to see some people look at some of these prime … city locations and say, ‘What should this be? How easy is this to convert to (residential)?’ And I think that’s one of the opportunities for our cities.”