🔒Hartford’s meeting, sports and event venues face risks as region cedes hotel inventory

Robert Murdock winced when he heard a few months ago that the Farmington Marriott would close as a hotel and be converted to a mixed-use apartment complex.

The 381-room property, located in an office park, was key inventory for bread-and-butter business travel and events taking place west of Hartford.

“Losing that hotel definitely hurt,” said Murdock, president of the Connecticut Convention and Sports Bureau, which helps facilitate events and travel for associations, sports leagues and various other groups throughout the state. “It hurts us in marketing and in finding spots for people to stay.”

The loss of hotel rooms was the latest in a string of hospitality industry hits that have come during the COVID-19 pandemic, and the situation is causing anxiety for event overseers, including managers of the Connecticut Convention Center, who say the region needs a strong supply of rooms in order to remain competitive for attracting major events, which are key to the local economy.

Pre-pandemic there was a projected need to actually add hundreds of new hotel rooms in Greater Hartford over the coming years to remain economically competitive.

Instead, the opposite happened over the past 12-plus months as leisure and business travel nosedived.

In Hartford, for example, owners of the Hotel Bond/Homewood Suites and Red Lion hotels have opted to convert those properties to apartments, taking more than 270 rooms offline. Meanwhile, the 215-room Red Lion in Cromwell closed in Jan. 2020, just ahead of the pandemic due to tax issues.

According to global hospitality data and analytics provider STR, the Hartford market lost about 4% of its hotel room supply in 2020 compared to 2019.

Through May of 2021, the region had already clawed back 0.7 percentage points of that loss, STR data show. Murdock is quick to note there are new properties in the pipeline, such as the Cambria Hotels in South Windsor and New Haven, and an extended-stay hotel on Day Hill Road in Windsor.

“There’s definitely more hotel inventory in play,” he said.

So while the wounded hospitality sector, which would be in a far worse position had it not been bolstered by millions of dollars in federal stimulus aid, is not yet in a crisis situation, Murdock and others are hoping no more large properties go dark in the coming months.

In downtown Hartford, one has already threatened to do so. The 392-room Hilton Hartford went to auction last November but didn’t secure a buyer. It remains open for business today.

Lisa Beers, a spokesperson for Waterford Group, which owns the hotel, said in a statement that vaccinations have brought “slight glimpses of hope” for hotels.

“As events begin to resume at the XL Center, Convention Center, and other venues and attractions, our hope is that it will bring visitors back to the city to patronize the hotels and restaurants,” Beers said. “However, corporate travel remains low and this market segment is vital to the long-term success of businesses in the Greater Hartford region. Industry experts predict that this segment will take much longer to recover. We continue to explore all options for the Hilton hotel.”

Mixed mission

For years, the Capital Region Development Authority (CRDA) has dangled low-cost financing with favorable terms to build up Hartford’s supply of market-rate apartments, and today has nearly 2,200 units either built or in the development pipeline.

Apartments remain the top focus for CRDA, but lately the quasi-public agency has been thinking increasingly about hotel stock in the city and surrounding communities.

The main reason for that is hotels make it possible to book sizable events at the Convention Center and XL Center, both of which CRDA oversees.

“The argument was and is because we are limited in our hotel room counts, we really aren’t in the running for certain types of events, and to get there we have to add more rooms,” said Michael Freimuth, CRDA’s executive director.

Developing housing and redeveloping the city’s tax base are two missions that can clash at times, such as when the owner of a struggling hotel is looking to put together sufficient financing to convert hotel rooms — units that are crucial to CRDA venues — to apartments.

“From a CRDA perspective, we really wear two hats and this is somewhat of a schizophrenia,” Freimuth said. “Realistically, we need the Hilton rooms for the Convention Center.”

CRDA has not done a hotel deal in modern times, though its predecessor agency, CCEDA, managed the deal that led to the construction of the Convention Center and Hartford Marriott at Adriaen’s Landing around the turn of the century.

Hotels generate economic activity, so CRDA would be well within its purview to finance a portion of a hotel project, Freimuth said.

Over the past few years, developers have explored boutique hotels around Bushnell Park. At its 55 Elm St. mixed-used office conversion project, Norwalk developer Spinnaker Real Estate Partners has reserved the possibility of converting some of the 161 planned apartment units to hotel rooms, depending on market conditions. Meanwhile, parking magnate Alan Lazowski has floated a hotel concept for 15 Lewis St.

Those two proposals alone could make up for Hartford’s COVID-19 hotel losses thus far, CRDA has said.

In addition, Freimuth said there have also been “on again, off again” hotel conversations about the former WFSB studio site in Constitution Plaza.

“I would think we would get caught up in one of these deals somewhere pretty soon,” he said. “But I think for now, everyone is just trying to recover from COVID.”

Hotel to housing

In June, a joint venture consisting of major Hartford landlord Shelbourne Global Solutions and Waterbury’s Axela Group acquired the Red Lion hotel at 50 Morgan St. in downtown Hartford for $22 million.

The new owners plan to invest another $8 million to complete a stalled apartment conversion at the property, which has been rebranded as The Millennium.

Yitz Rabinowitz, vice president at Axela, said the decision to complete the conversion was based on the fact that half of the property was already apartments, and the buyers felt they had to choose one identity for it.

Rabinowitz said Axela and Shelbourne had the property under agreement before the pandemic hit. As they explored their eventual investment, they heard several pitches from hotel operators trying to convince them the property was better as a hotel than apartments.

“The numbers looked really good, but once COVID hit we thought it was too risky,” Rabinowitz said.

Both Shelbourne and Axela have more expertise in apartments, and they thought a hotel investment could be more volatile.

Still, Rabinowitz says the hotel presentations have stuck with him, and he would explore an opportunity to invest in a Hartford hotel if one came up.

“I think hotel rooms are going to be in demand very soon and I think there’s a shortage of hotel rooms, so they are going to be very important,” he said.

In addition to hotel conversions, Freimuth says he also has his eye on potential office-to-apartment conversions, which he expects will mainly impact middle-tier properties, rather than Class A towers, since the former are suffering from higher vacancy rates.

“There will be some office conversions to residential in Hartford and maybe even surrounding towns,” Freimuth said. “I think it’s very possible in East Hartford.”

If a wave of those conversions crops up, some of the considerations will be the same as with hotels.

“Similar to the discussion we have about whether we have enough hotel rooms, you also don’t want to wake up one morning and find out you have no office space,” he said.