🔒Battered hotel industry looks to the future for relief

To see New Haven Harbor from the top of the Pirelli building, you have to look past a parking lot, a raw stretch of Sargent Drive and the congested sprawl of Interstate 95.

There, beyond the ugliness, lies an expanse of blue-gray water.

In a similar fashion, New Haven hoteliers are looking beyond the economic ugliness of recent months for the recovery of the once-booming industry, laid low by the coronavirus pandemic.

“We have optimism for next summer, next fall to improve, but not to get back to 2019’s numbers. That’s not realistic,” said Steve Matiatos, general manager of the Courtyard by Marriott New Haven at Yale and president of the Connecticut Lodging Association. “There’s that type of optimism for the road ahead, but it’s more of a long-term rather than a short-term resolution.”

The start of the school year and the partial reopening of area colleges have failed to bring a significant number of travelers to New Haven as the pandemic continues to rage, industry experts said.

A slight bump in hotel occupancy over the summer due to refugees from August’s tropical storm subsided quickly, and the usual flood of parents and prospective students failed to materialize.

The summer months of June, July and August saw hotel occupancy in New Haven County drop to 49.5 percent this year compared to 73 percent for the same period in 2019, according to hotel market data firm STR. Average daily room rates also dropped to $94 in 2020 from $114 a night last year.

Statewide, hotel occupancy in August this year dropped to 55 percent compared to 71.5 percent in August 2019, with average daily room rates dropping to $109 from $124, according to the most recent data available. Shoreline hotels did the most business this summer as city dwellers sought out local beaches.

“Leisure travel seems to be coming back but our concern is that business travel is still not happening,” said Ginny Kozlowski, executive director of both Visit New Haven and the Connecticut Lodging Association. “Until business travel starts to return on a meaningful level we are cautious going into what would normally be a very busy time of year for us.”

One bright spot in the industry is mid-sized bed and breakfasts, which have jumped in the “micro event” business by hosting small weddings and other scaled-back celebrations. Boutique hotels in cities are also “holding their own,” Kozlowski said, due to customers upgrading their reservations thanks to lower prices.

Boutique trend

Small, stylish and appealing to younger customers, boutique hotels have multiplied in the state’s urban centers, none more so than in New Haven. The past several years alone have seen the opening of Graduate New Haven in the former Hotel Duncan and The Blake at High and George streets.

The newcomers joined veteran boutique hotel The Study at Yale, which saw its room rates rise to nearly big-city levels before the pandemic hit – with valet parking costing $32.

The trend toward smaller, more high-end properties shows no sign of abating in the area, with plans under way for a 132-room Hilton Garden Inn on Elm and Orange streets, and a 130-room Cambria hotel due to start construction in November on Route 34 near Yale New Haven Hospital.

Stamford developer Randy Salvatore, who cut the ribbon on the The Blake in February, renovated a historic building and opened the 94-room The Lloyd in Stamford in August.

Salvatore said The Blake was holding its own in the difficult New Haven lodging market.

“It’s going as well as possible,” Salvatore said. “We’re in it for the long haul.”

Boutique hotels in general are attracting more business due to their appeal to upscale consumers, Salvatore added.

It’s those long-term prospects that keep Bruce Becker optimistic about the most visible new entrant in New Haven’s boutique hotel sweepstakes – the upscale lodgings planned for the former Pirelli Building on Interstate 95.

Empty for two decades, this landmark of Brutalist architecture has appealed to Becker since his grad-school days at Yale. Designed by Bauhaus star Marcel Breuer and built in 1968, the blocky, concrete-clad structure features artistic use of “negative space” between its two main units and has long polarized New Haven residents.

Ikea bought the building in 2003 but its reuse was stymied by 1960s-era spray-on fireproofing full of asbestos.

“As an architect I’ve been fascinated by the Pirelli building for some time,” said Becker, a principle at Becker + Becker Architects in Westport. The Modernist landmark represented both a commercial opportunity and a preservation challenge for the firm, he added.

“We look for projects where we have an opportunity to transform historic buildings or urban sites and adapt them to the market needs.”

The market needs more hotels that satisfy the growing urge for sustainable design and travel, Becker said. The 165-room Hotel Marcel New Haven planned for the Pirelli building would be LEED Platinum, the highest ranking possible for green building design. It is also being planned as the first-ever hotel certified under “passive house” standards, meaning the hotel will cut its energy use dramatically with a “very well-insulated, high-performance envelope” in addition to solar panels, Becker said.

There has been talk for decades about repurposing the building, but Becker and his partners on Sept. 30 officially began construction. The asbestos has been removed and interiors are being retrofitted, with a finish date tentatively set for the end of next summer.

Hilton has agreed to include the Marcel in its Hilton Tapestry Collection, marketed as “a gathering of original upscale hotels that cater to guests seeking reliability and value in their independent hotel choices.”

Even with the national endorsement, however, Becker is realistic about the marketplace that the new hotel will face in 2021.

“I’m not expecting the market to be strong when we open; we sort of factored that in,” Becker said.

On the brink

Hopes for a rebound in hospitality may come too late for older and heavily indebted hotel properties, said Kozlowski of the Connecticut Lodging Association. An August report by Trepp found that 23.4 percent of hotels nationwide were 30 or more days delinquent on their loans, signaling a possible future wave of foreclosures.

Homewood Suites by Hilton in Hartford closed down early in the pandemic only to reopen this fall as a short-term apartment building. Hilton's flagship hotel in downtown Hartford was set to go on the auction block in November after laying off 124 employees.

In New Haven, the Omni New Haven Hotel at Yale repeatedly delayed its reopening after shutting down when COVID-19 hit and told the labor department in September that it was extending furloughs for 170 workers. Hotels like the Omni across the state that depended on trade shows and conference business are hurting badly, Kozlowski said.

The pandemic is also accelerating trends like remote work and virtual conferencing that may mean permanent shifts in the hospitality industry, said Matiatos of the Lodging Association and Courtyard by Marriott.

“You may see less overall travel,” Matiatos said. “We’re going to hear more closings over the next couple of months for sure.”

Matiatos himself has had to lay off more than half of the Courtyard’s 70 employees in New Haven, although he was able to bring some workers back in August. With travel still in a slump, he said he was trying not to make predictions about the immediate future.

“Each month is a great unknown as we work through this,” Matiatos said. “None of us want to open and increase our business at the risk of others. This is a long game for us.”