Hotel industry continues to be hit hard by pandemic

Just as health care professionals are bracing for a new surge of COVID-19 cases with the approach of colder weather, expectations for the lodging industry, both in

Connecticut and nationally, are that there will be a surge of failures as the year comes to a close.

A national report from Trepp, a New York Citybased data and analysis firm, predicts the hotel industry is facing a historic wave of foreclosures as the COVID-19 pandemic continues to devastate small business hotel owners and their workforce.

Since the beginning of the

pandemic, the hotel segment has faced a historic number of delinquencies and is the most heavily hit sector of the commercial mortgagebacked securities market.

The percentage of loans that are 30 or more days delinquent was 23.4 percent as of July, the highest percentage

on record. That percentage is exponentially higher than where it was at the end of last year, when the percentage of loans that were 30 or more days delinquent was 1.34 percent.

That prospect already is presenting itself in Connecticut, particularly in Hartford area.

The Waterford Group, which operates both the Hartford Hilton and Marriott

Hartford Downtown, announced last week it will auction off the Hilton.

If no bidder can be found and the Hilton has to close, it would join another Hartford hotel, the Homewood Suites by Hilton, a 116-room hotel on Asylum Street, in shutting down. The Homewood Suites by Hilton closed in March.

“I think we’re going to see more of this,” said Ginny Kozlowski, executive director of the New Haven-based Connecticut Lodging Association.

How long before other Connecticut hotels suffer financial distress depends upon their level of financial reserves as well as where they are located, according to Steve Matiatos, president of the Connecticut Lodging Association.

“Some hotels did OK this summer, particularly those along the Shoreline,” Matiatos said. “But downtown hotels did not do well and haven’t done well for some time.”

That’s because the downtown hotels depend heavily on business travel as well as playing host to events and weddings, Kozlowski said.

“Without business traffic, without weddings, it’s going to be a struggle for these hotels,” Kozlowski said.

New Haven’s Omni New Haven Hotel at Yale was scheduled to reopen Sept. 4 following its pandemic closure, she said. But the Omni

didn’t end up reopening until Sept. 16 — and returned with fewer than 20 of the 135 unionized workers it had furloughed on March 30.

“Right now, the number of employees working there is based upon a lower occupancy rate,” said Ian Dunn, a spokesman for Local 217 of UNITE Here, a union representing hospitality workers.

Furloughs for a majority of the 170 Omni employees that were furloughed on March 30 likely are to be extended beyond the end of September, said Fletcher Williams, the hotel’s general manager.

In a letter to the state Department of Labor, Williams told state officials “due to business circumstances that were unforeseen at the time of the layoffs, the hotel now reasonably anticipates that a sufficient number of furloughs will extend beyond six months.”

Hotel officials were not available for comment on why the opening had been delayed

As for Shoreline hotels, they were able to attract some vacation travelers, Matiatos said.

“I think in the summer we had all hoped the fall would offer a bump in business travel,” he said. “But we haven’t seen it yet.”

Kozlowski said occupancy rates in Connecticut are about half the normal level. For example, she said the

statewide hotel occupancy rate this July was 42.5 percent, down from 72.5 percent during the same period last year.

Although many hotels around the state are suffering, there are a few bright spots in form of new hotels opening.

A new 123-room SpringHill Suites by Marriott in Cromwell opened last week. It is owned and managed by Titan Group, a Harrisburg, Pa., hospitality chain that also has the Courtyard by Marriott in Southington as part of its portfolio.

And in August, Fairfield County developer Randy Salvatore opened the former Hotel Zero Degrees in Stamford and converted it into The Lloyd, a 94-room boutique hotel affiliated with the Hilton chain, that sits across the street from a residence hall for the UConn’s Stamford campus.

Salvatore said the arrival of the coronavirus in Connecticut meant the hotel makeover that created The Lloyd “took a little longer, but we got it done.”

“At one point there was shortage of some materials, but we continued on with the work and kept going,” he said.

The Lloyd opened in August. Salvatore said the pandemic, combined with the usual challenges associated with establishing a new hotel, have meant a slow start for The Lloyd.

“We’re in this for the long haul and we’ve received amazing feedback from those who have stayed there,” he said. “We’ve done tours of the hotel with a lot of the people who handle business travel for companies. What they’re telling us is that they’re not doing any traveling now, but when things begin to improve, they will be sending some business our way.”

Salvatore’s Stamfordbased development firm, RMS Companies, has residential, student housing and hospitality business portfolios. In addition to The Lloyd, RMS has five other hotels, including The Blake in New Haven and The Goodwin in Hartford.

“What we’re seeing across our portfolio is a lot more leisure travel: If I compare the hotel’s performances today to March, there has been a significant increase,” he said. “The weekends have been fairly busy.”

But Salvatore predicts “it’s going to be a while — years, not months,” before the state’s hotel industry recovers from the damage the pandemic has caused.

As for the state’s existing hotel base, Salvatore said the pandemic “has accelerated the path of those properties that were already dated, that were headed toward obsolescence.”