Hotel investment sales off to a strong start this year, with leisure markets continuing to outperform

Travel is finally seeing the rebound hotel operators have been waiting for since the onset of the Covid-19 pandemic more than two years ago.

The week ending April 16, the most recent data available, saw U.S. hotel occupancy at 62%, still 5.6% less than the same week in April 2019, according to data from Hendersonville, Tennessee-based hospitality data company STR Inc. But the average daily rate was $147.25, a 14.4% increase from the same time in 2019, and revenue per available room was $91.25 — 8% higher than the same week three years ago.

Drive-to leisure markets are still dominating the overall hospitality industry's recovery. Among the top 25 U.S. markets evaluated by STR, Tampa, Florida, had the highest occupancy increase over 2019 — a 3.2% increase, to 76.6% — the week ending April 16. Phoenix posted the biggest ADR increase of 33.8% from the same week in 2019, to $189.16.

Those types of markets, subsequently, are where investors seem most interested in placing capital.

Carlos Rodriguez, president and CEO of Coral Gables, Florida-based hospitality investment firm Driftwood Capital LLC, said his company's overall portfolio saw ADR up 7% and revPAR down 3% in the first quarter, compared to 2019. But among leisure-market hotels it owns, ADR was up 16% compared to 2019. ADR among its Florida hotels specifically was 14% higher than Q1 2019 levels.Sun Belt markets like Florida, particularly ones that've had looser pandemic-related restrictions, and ski resorts continue to outperform hotels in business-oriented cities and properties in Northeast or Midwestern cities, Rodriguez said.

Minneapolis saw the largest occupancy decrease among 25 markets from 2019 the week ending April 16 — a 22.7% decrease, to 46.6%. It also saw the biggest revPAR deficit, a 22.5% decline from 2019, to $52.66, according to STR.

A prolific hotel investor, Driftwood won't necessarily write off markets that haven't seen a full rebound yet for acquisition opportunities. But it would, at least right now, primarily look for deep discounts in those areas, Rodriguez said.

"I think you will see opportunities in the areas that were most affected," he continued. "You just need to be selective and careful about injecting enough working capital to sustain it through the ramp-up."

There's a lot of money chasing hotel deals right now, and Driftwood has frequently been outbid by other groups on deals, he added. Billions in capital were raised in anticipation of widespread distress in the hotel sector, but federal stimulus and deferred loan payments, especially in the early days of the pandemic, have staved off a wave of delinquent properties.

Last year, $50 billion in hotel deals transacted nationally, a record, according to CoStar Group Inc. (NASDAQ: CSGP). A handful of headliner transactions, such as the $5.7 billion sale of The Cosmopolitan in Las Vegas, boosted those figures.

But it seems likely 2022 will be another robust year. More than $12.5 billion worth of hotel properties sold in Q1 — the best opening quarter since 2016, according to CoStar. Brian Waldman, executive vice president of investments at Atlanta-based Peachtree Hotel Group LLC, said his firm bought pools of mortgage notes on hotels from banks throughout the pandemic. He said restructuring those notes helped borrowers get through the worst days of the pandemic for the hotel industry, and provided a chance to recapitalize or sell the property when values rebounded.

Waldman said, of the more than 200 notes his firm bought since the pandemic, almost all have been paid off.

"Buying notes is a very cyclical opportunity," he said. "The window opened in Covid, where traditional regulated banks were looking to get hotel paper off their books. As we come out of the pandemic and things start to recover, that window kind of closes."

The industry is coming into a perfect storm for deal activity because pandemic-weary hotel owners are ready to recapitalize or offload their properties, he added.

In particular, for capital-starved properties, 2022 could be a moment of truth.

Many hotels secure debt in commercial-mortgage-backed securities, or CMBS, loan portfolios. The lodging sector's delinquency rate among CMBS properties was 7.99% in early April, a notable decrease from 14.73% a year prior, according to Radnor, Pennsylvania-based commercial real estate data platform CRED iQ.

Rodriguez said he expects more CMBS loans will be coming due this year and next, as a lot of 10-year loans were issued toward the end of the global financial crisis a decade ago. An analysis by The Business Journals found, among hotels with CMBS debt facing some level of distress, 386 portfolios are set to come due this year or in 2023. That represents about 20% of all limited- and full-service hotel loans with potential distress, including 237 limited-service hotel portfolios and 149 full-service hotel portfolios.

Distress, as evaluated by The Business Journals, includes properties flagged by loan servicers as at least 30 days delinquent on loan payments, in some stage of the foreclosure process, in special servicing or on so-called watchlists because of issues that may affect a borrower's ability to stay current on payments.

And, as The Business Journals previously reported, distressed full-service hotel properties with CMBS debt have seen $2 billion in reduced property value since the pandemic. Limited-service hotels have collectively seen a reduction of $870.7 million.

When that CMBS debt matures, owners of, in particular, business travel-dependent hotels in markets that've yet to rebound could struggle to meet refinancing hurdles, forcing them to sell, Rodriguez said.

"I think a lot of assets will be traded," Waldman said. "The question will be around value. There's so much pressure on the lender that owners are forced to sell. Can the owners sell at a number where they’re comfortable to move on?"

Jan Freitag, national director for hospitality market analytics at CoStar, said there's a distinct tale of two cities when it comes to hotel investment and valuation.


He cited last year's sale of the 59-room Alila Ventana Big Sur resort in Big Sur, California, which Chicago-based Hyatt Hotels Corp. (NYSE: H) acquired last summer for $148 million, a North American record of $2.5 million per room. Three months later, Hyatt sold the hotel for $150 million, to Bethesda, Maryland-based REIT Host Hotels & Resorts Inc. (NASDAQ: HST), setting another record of $2.54 million per room.

And the newly built 346-room W Hotel Nashville sold for a record-shattering $328.7 million to Orlando, Florida-based Xenia Hotels & Resorts Inc. (NYSE: XHR) last month.

Conversely, the Sheraton New York Times Square — one of New York's largest hotels, with 1,780 rooms, in the heart of midtown Manhattan — recently sold for $373 million to New York-based MCR Hotels and Island Capital Group LLC. That's $365 million less than the $738 million the previous owner, Host Hotels, paid for it in 2006. The new owners say they plan to invest more than $100 million in the hotel's rooms, banquet areas and public spaces.

But the dichotomy in pricing shows how office demand — and, subsequently, corporate-meeting demand to fill local hotel rooms — remains unknown for a place like midtown Manhattan, Freitag said. That could then weigh on those markets' hotel sales activity and pricing. Premium hotels in destination spots like California, Las Vegas or Nashville, Tennessee, meanwhile, are proving hot with investors and commanding top dollar.

Some hotel owners weren't in a position to materially renovate or update their properties in the past two years, but brands have recently begun putting pressure on operators to invest in their properties — whether through a rebrand, new amenities or extensive renovations.

But so many owners used reserves to keep making interest payments to lenders during the worst of the pandemic, Freitag said, which means many remain strapped for cash to embark on additional investments. Plus, elevated inflation and surging construction costs are making renovation and new-construction projects alike more expensive.

Driftwood recently acquired the 326-room Scottsdale Resort at McCormick Ranch property in Scottsdale, Arizona, and 240-room Sheraton Old San Juan Hotel in Puerto Rico, both of which will undergo multimillion-dollar renovations. Driftwood will convert the Scottsdale resort to a Curio Collection by Hilton and update all guest-facing areas, including food and beverage concepts, the pool and spa-and-fitness center. The hotel in Puerto Rico, which also includes 27,500 square feet of retail space, will become a Tribute by Marriott flag and also receive revamps throughout.

Because revenue is exceeding projections at both of those properties, that'll help offset some of the steeper costs associated with upfitting those properties, Rodriguez said.

And because of rising costs across the board — construction, acquisition, financing, even labor costs, as employment in leisure and hospitality was down by 1.5 million workers, or 8.7%, in March 2022 compared to February 2020 — investors are approaching each potential deal with elevated scrutiny.

Waldman said, more recently, investors new to the hotel sector are looking for opportunity in select markets, observing an uptick in values. And, among commercial real estate property types, hotels are also widely viewed as a hedge against inflation, as pricing resets nightly instead of much longer lease terms in other sectors, Freitag said.

"The hotel industry is a great industry, and there’s a lot of opportunity to create value," Waldman said. "But it's a lot more nuanced than other asset classes."

By Ashley Fahey – Editor, The National Observer: Real Estate Edition,

Apr 27, 2022

SBA has rolled out PPP loans, venue and restaurant grants. Is the hotel industry next?

The hotel industry is pushing Congress to create its very own $20 billion grant program — hopefully by the end of the summer.

The Save Hotel Jobs Act, introduced by Sen. Brian Schatz, D-Hawaii, in the Senate and and Rep.Charlie Crist, D-Fla., in the U.S. House of Representatives in late April, would create a new grant program for hotels that saw a drop in revenue of 40% or more during 2020 to receive grants of up to $20 million, administered by the Small Business Administration.

“We would hope to do it by the end of summer,” said Chip Rogers, president and CEO of the American Hotel & Lodging Association, adding while the standalone legislation offers a blueprint for the program, it most likely needs to be part of one of the larger packages being debated in Congress. “We would like to be a part of one of them because we feel this fits perfectly in any kind of recovery bill.”

The industry is coming off a year in which it saw a loss of about $110 billion in revenue. Despite more travelers expected this summer and hotel bookings beginning to recover, Rogers said the industry is not anticipating a full recovery until 2023 or 2024.

He said he is confident Congress will pass some sort of aid for hotels.

“We have heard from a lot of lawmakers that say we know how bad the industry has been hurt and it still needs some help,” Rogers said, although the $20 billion is not large compared to the industry’s losses. “This is a very small part of that but, even under the best circumstances, we are not going to recover immediately coming off of a year like that.”

The push for a hotel-industry specific grant program comes as the SBA’s Restaurant Revitalization Fund has approved its first $2 billion in grants to more than 16,000 businesses, after more than 180,000 applied in the first two days of open applications. The SBA’s Shuttered Venue Operators Grant program had a rockier start, having to shut down its portal after launching in April, only to reopen it several days later.

The legislation pending in Congress has also been endorsed by UNITE HERE, the largest hospitality workers union in North America, which Rogers credits to the grants having to be used nearly entirely for payroll and payroll-related expenses, allowing hotels to staff up and unemployed workers to return to their jobs. A small portion of each grant could be used for Covid-19 mitigation and personal protective equipment.

"We are just really trying to survive," Rogers said, adding that some events commonly held at hotels are planned years in advance, and that business largely disappeared during Covid. "Things are starting to get better. It's just a slow slow recovery," he said.

The push for hotel grants comes as other sources of funding dry out. The SBA said earlier in May it was shutting down its Paycheck Protection Program portal to new applications, unless you are a community financial institution, which can take part in a multibillion-dollar set aside. And the subsequent PPP loan forgiveness process and the inevitable appeals and legal challenges could take years to resolve.

The SBA also continues to address new aspects of its various grant programs. On April 23, it announced it was rolling out Supplemental Targeted Advances, which will go to 1 million eligible small businesses that the SBA said it will begin contacting over the coming weeks. These grants will be open to small businesses even if they have already received $10,000 through its other grant programs, but a company must be located in a low-income neighborhood as designated by this SBA mapping tool, an issue that has caused headaches for some small businesses.

What's behind recent labor shortages — and how it could play out locally

Labor shortages are dotting the national landscape, but economists are hoping it's a short-term issue.

Some sectors, such as restaurants and hospitality, have been slower to rebound from Covid-19's impact. Now opening at increased capacity, some of these businesses are finding it difficult to staff up to meet the demand. This is also the reality for many Charlotte-area businesses.

Local companies are trying to find more workers. The metro area lost 160,400 jobs during last year's pandemic-related shutdown, most of which were at restaurants, bars and hotels, said Mark Vitner, senior economist at Wells Fargo. It has since added back about 113,600 jobs. That still leaves nearly 47,000 jobs to recover.

About 4.6 million workers nationwide are absent from the labor force because of the virus. There are multiple factors at play. Approximately 700,000 people left because of a skills mismatch. Others are hesitant about in-person interactions. About 1.2 million people may not return due to retirement, according to a recent study from Bank of America Global Research.

Workers close to retirement may have elected to step back earlier because of Covid-19. Financial markets have stayed strong in this downturn, meaning those workers have the means to retire. That's a shift from the Great Recession when older employees were forced to stay longer, said Joe Song, senior U.S. economist at BofA Global Research.

"We haven't seen the same sort of dynamics that we'd see in a traditional downturn," Song said. "The question moving forward is, does that pace slow down and get back to pre-pandemic levels, or is there a level shift in the number of retired workers?"

He said it will take some time for younger workers to fill in the roles. Skills gaps tend to correct themselves when the labor market is booming. That's when workers are more likely to go back to school and employers are more likely to train on the job, Song said. Employers continue to hire for more technical positions and look for experts on new machines and devices, he said.

Song said he expects employment to return to pre-pandemic levels early next year.

Another issue is expanded federal employment benefits that allow people to stay out of the workforce longer than usual, Vitner said. As expected, the latest stimulus package took away some of the workers' urgency. Vitner said states could try incentivizing the return to work. Montana, for example, is giving $1,200 bonuses to eligible workers who find new jobs.

The other option is to wait until the expanded benefits run out in September, Vitner said. He is confident labor shortages will diminish after that change.

The April jobs report released on Friday was a disappointing one, with the national economy adding 266,000 jobs last month, instead of the predicted 1 million positions. The national unemployment rate also rose 0.1% from March to April, the first rise in about a year. North Carolina's unemployment rate was at 5.2% in March.

Gus Faucher, chief economist at PNC Financial Services Group, said it would take the country two and a half years to return to pre-pandemic job levels at this rate. However, other economic indicators showed strength. He is hoping April is just a short-term lull in the data.

The national labor-force participation rate is well below pre-pandemic levels, Faucher said, but it has started to pick up in the last couple months.

"Lots of open questions out there, but I am hopeful that, as we get further away from the pandemic, that we will see more people re-entering the labor force and that they'll provide the workforce for job creation," he said.

Vitner is expecting strong job growth in the next couple of months. Much of this area's job growth is coming from newer companies moving here, he noted. Younger workers will also be out of school and looking for work this summer. Vitner said Charlotte could recover those 47,000 jobs or more by the end of the year. He also expects it to continue to be one of the fastest-growing metro areas in the country.

Labor supply issues could limit economic recovery, Vitner said. There will still be growth, however. Economists are projecting an 8.9% GDP growth rate in the second quarter, followed by 8.1% in the third quarter, he said.

Charlotte hotel owners file for Chapter 11 bankruptcy protection amid Covid pressure

These Charlotte-area hotels are seeking bankruptcy protection as Covid continues to pressure occupancy.

Aloft Charlotte Airport, owned by Aarna Hotels LLC,  and Courtyard Charlotte Steele Creek, owned by Sri Vari CRE Development LLC, filed for Chapter 11 bankruptcy protection at the end of April.

Both bankruptcy petitions report assets of just over $10 million to $50 million — and debts in the same amount. Funds are expected to be available for distribution to unsecured creditors; both have up to 49 creditors.

An interim court order allows cash collateral to be used for expenses such as employees’ salaries and costs to operate the hotels.

“Our goal continues to be to find the best solution for all stakeholders and we believe that Chapter 11 allows us the opportunity to do so,” says AnujNarayan Mittal, CEO of Raleigh-based MJM Group.

That hotel group is part owner of both facilities. 

The $28.3 million, 139-room Aloft hotel, at 3928 Memorial Parkway, was forced to close just two weeks after opening. Occupancy dipped as low as 20%, with Covid keeping its doors closed for months, he says.

The 118-room Courtyard by Marriott Steele Creek, located at 8536 Outlets Blvd., had to push its opening back until July 31. It cost $23.5 million to realize.

A third property that MJM has a stake in — a dual-branded hotel in north Charlotte — also filed for bankruptcy protection last August.

“This is 100% Covid related. We’re not seeing the rates that we need to get back on our feet,” Mittal says.

He says the hotel group’s hand was forced by creditors that refused to find an amicable path forward. For example, hotel notes for Aloft and Courtyard were sold to a national hotel ownership company that declared them in default and demanded outstanding loan amounts be paid within 10 days, Mittal says.

“People are looking for opportunities to crush people like us,” he says. “This is a favorable time for the lawyers and the hedge funds.”

Mittal said Friday he doesn’t expect to be able to save the dual-branded hotel in north Charlotte from an eventual sale. That facility consists of the Residence Inn by Marriott and Courtyard by Marriott, located at 9110 Harris Corners Parkway. 

“That’s just out of reach,” he says. “It’s in the court’s hands now.”

He has a more positive outlook on Aloft and the Courtyard in Steele Creek, as more people become vaccinated and travel picks back up.

Occupancy is hovering between 45% and 50%, he says. Pre-Covid occupancy levels were about 75%

“These hotels were built to cater to corporate demand. We’re not seeing corporate demand return yet,” he says. “It’s been just a ghost town.”

That hospitality group also operates a Residence Inn in Steele Creek and a dual-branded Residence Inn and Fairfield Inn & Suites.

Mittal says the last year has been devastating to his company, but he can recover because he still has his health and loved ones.

“We’ve been able to do it once. We’ll just start fresh and build back in the years to come,” he says.

Charlotte tourism chief optimistic recovery is underway despite ongoing challenges

It’s National Travel and Tourism Week. What, you forgot? You never knew it existed? Me neither.

But it provides a handy excuse to check in on the local tourism industry — an idea embraced by the Charlotte Regional Visitors Authority. Few, if any, parts of the national or local economy have suffered more than hotels, restaurants, bars and other people-intensive businesses, for obvious reasons. Fourteen months of Covid-19 brought mandatory capacity and travel limits as well as ongoing consumer hesitancy.

With declining trends of infection, hospitalization and death and rising vaccination rates — 50% of North Carolinians are at least partially vaccinated — more and more people are ready to get out of the house. Or at least start planning to get out of the house.

“I’m pretty excited about the recovery we’re starting to witness,” visitors authority CEO Tom Murray told me Thursday. “Particularly on the leisure travel side. We’re starting to see (hotel) occupancies get back to pretty strong levels.”

According to figures compiled by industry analyst STR, beginning March 20 and running through May 1, Mecklenburg County hotel demand eclipsed 100,000 rooms during each of those seven weeks. Prior to that, demand had not reached 100,000 in a week since the pandemic started in March 2020. 

Revenue also reached pandemic-era highs, ranging from $8 million to $10 million during that same period, compared with revenue of $5 million to $7 million per week over the rest of this past year.

Leisure travel, mainly in the form of friends and relatives visiting, has been the primary source of tourism business thus far, Murray said. 

As vaccinations ramp up, people are eager to spend time with one another after many months apart. It will take longer for corporate and convention travel to rebound, though recent surveys by national marketing and consulting firms Destination Analysts and Northstar Meetings Group show growing appetites for both, likely in the second half of this year.

There are glimmers of hope, true, but industry analysts predict it will take a couple of years for tourism to return to pre-pandemic levels. In the Charlotte region, direct visitor spending was $7.8 billion annually, fueling 147,000 jobs. After a surge in layoffs last spring, things improved but, overall, local hospitality employment is off by 17% since Covid.

An illustration of how far there is to go can be found in hotel occupancy rates. According to STR, 68.3% of rooms were filled in 2019; last year, it was 43.3%. And even the recent two-month run of gains pales when compared to 2019: Between March and May of this year, occupancy rates soared by Covid-era standards — to a little more than 50%.

Hotel revenue plummeted 63% during the pandemic year in Charlotte, falling to $302 million from $808 million. More than 25% of area bar and restaurant revenue, a combined $1.1 billion, was lost during the same period. Combined taxes on restaurant meals, hotel rooms and rental cars, money used to pay for sports and cultural venues, among other projects, slipped to $98.6 million in fiscal 2020, down from $123.1 million the previous year.

Charlotte’s top tourism source has long been corporate travel. It’s not a leisure destination and it’s a second-tier convention and trade show site, though a nearly finished $127 million renovation and expansion of the convention center is aimed at bolstering that business. As a major financial center and with American Airlines’ second-largest hub providing a large selection of direct flights, corporate travel has been reliably strong.

Murray told me Thursday that when major employers return to their offices, business travel will naturally follow. Large companies including Bank of America and Wells Fargo are planning to have employees back in significant numbers starting around Labor Day — meaning corporate travel is still months away.

He’s hoping more government recovery grants and loans for hotels, restaurants and others can serve as a stopgap as the rebound builds. State government received $5.3 billion from the American Rescue Plan Act, while Mecklenburg and Charlotte were allocated a combined $364 million, though the money will be paid in 50% installments a year apart.

Despite the staggering losses, and ongoing struggles for restaurants and bars to find workers for re-staffing, Murray said the recent gains demonstrate the sector’s resilience: “We’re on our way to recovery.”

Charlotte hotel industry now hopeful federal grants might help with COVID-19 recovery

The Save Hotel Jobs Act could provide up to $20 million to assist with payroll costs as demand for hotel staff increases.

CHARLOTTE, N.C. — Hospitality had the highest unemployment of any segment of the economy as a result of the COVID-19 shutdowns. That’s according to the Asian American Hotel Owner Association (AAHOA), an organization now in support of a bill that could provide some much-needed relief to hoteliers nationwide.

Over the past year, a combination of low occupancy and high unemployment hit the hotel industry especially hard.

“We had to lay off a lot of people and business dwindle down to next to nothing,” Executive Director of Charlotte Area Hotel Association Vince Chelena said.

With the introduction of the Save Hotel Jobs Act, the plan is to provide up to $20 million to help with payroll costs to employ and re-employ hotel staff.

"It’s the first real sign of a targeted stimulus just for our industry,” President & CEO of AAHOA Cecil Staton said.

Staton says this financial help is needed now more than ever as corporate travel continues to pick up along with growing leisure travel. An increase in demand means more hotel staff is needed.

"We’re hiring and we need to hire a lot of people,” Chelena said.

At least 10,000 hotel hires are needed in Mecklenburg County alone. The Charlotte Area Hotel Association says they hope to host upcoming job fairs and work with Charlotte-Mecklenburg Schools to recruit recent graduates ready to enter the workforce.

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Gov. Roy Cooper eases more Covid restrictions on restaurants, bars and other businesses in North Carolina

Restaurants, bars and retail stores in North Carolina can take a big step closer to normalcy this weekend as Gov. Roy Cooper is once again easing restrictions on how businesses can operate.

Cooper announced Tuesday that restaurants, breweries, wineries and gyms can increase indoor capacity limits to 75% — up from 50% — and outdoor capacity to 100%. Also, bars and event venues, such as conference centers and sports arenas, will be allowed to operate at 50% of indoor and outdoor capacity, and the 11 p.m. cutoff for alcohol sales will end.

Bars, one of the hardest-hit industries under Cooper's restrictions, have been allowed to operate at 30% of indoor capacity since the end of the February.

The statewide face-mask requirement remains in place along with rules regarding social distancing in businesses and public places.

Cooper's latest executive order will go into effect at 5 p.m. Friday. The mass gathering limit, which covers other kinds of gatherings not otherwise laid out in the executive order, will be increased to 50 people indoors and 100 people outdoors.

"These are significant changes, but they can be done safely. We have said all along that the science and data would be our guide in this dimmer switch approach, and they show we can do this," Cooper said.

Since mid-January, North Carolina has seen its daily new cases of Covid-19 drop dramatically before leveling off in the past week. And the daily number of hospitalized Covid patients has fallen below 1,000 statewide. Meanwhile, the state's vaccination efforts have expanded and more than 4 million vaccine doses have been administered in the state, according to the Centers for Disease Control and Prevention.

Charlotte's hotel industry limps to recovery as some projects are put on ice

There's finally hope a return to some normalcy will occur in 2021, as Covid-19 vaccination supply ramps up and case counts are on a downward trajectory.

But nearly a year since the first stay-at-home orders were issued in Mecklenburg County and the state of North Carolina, the Charlotte hotel industry is still reeling. The sector and its employees have felt tremendous impacts and revenue loss as business travel shut off, conventions and large events were canceled, and tourism scaled way back.

The federal Paycheck Protection Program and a city of Charlotte recovery grant program have helped companies survive, but occupancy and rates are still far below pre-Covid-19 levels.

Data from analytics company STR from the week ending March 6, the most recent available, found Charlotte hotel room occupancy at 47%. Average daily rates, or ADR, hovered at $80 and revenue per available room, revPAR, was $37.64.

In 2019, Charlotte's occupancy rate averaged 68.3%, compared to 43.3% in 2020, STR found. ADR was $111.22 in 2019 and $86.53 in 2020, while revPAR went from $76.01 to $37.47.

The most recent numbers from March 2021 are certainly an improvement from last April, when the market bottomed out. But as the economy slowly reopens, hotels may still have awhile yet before seeing a true rebound. In fact, economists and industry watchers predict the hotel industry won't fully recover until 2023 or later.

Vinay Patel, principal at SREE Hotels, a large hotel owner based in Charlotte, said in January and February, the company was down 62% and 57%, respectively, across its portfolio compared to early 2020. So far in March, the numbers look a bit better — 32% down — but the calendar has reached a point when bookings and revenue severely dropped off because of the pandemic.

For an area like uptown, where corporate travel is that hotel market's lifeblood, the pain persists.

"Uptown Charlotte is dead," Patel said. "Anywhere that you’re looking for corporate transient or group business, it’s not there."

Hotel companies frequently have properties in multiple markets, some that attract business- and airport-driven traffic — like Charlotte — while others bring in more leisure travelers. Developers and owners report hotels in popular tourist areas, like beach towns and the mountains, have outperformed business-driven markets through the pandemic.

Recovery also depends on how a state government has handled reopening. States like Florida are seeing better occupancy numbers and rates than others with more restrictions in place, said Birju Patel, president of High Point-based BPR Properties.

Charlotte-based OmShera Hotel Group is finishing construction on a 135-room Hyatt House hotel at Rea Farms, which will deliver in late June. The company also has hotels in the Piper Glen area and Pineville.

The Ballantyne submarket, right now, is hovering around the upper 40% to 50% occupancy range, said Kush Anandani, director at OmShera. He said he wouldn't use the word rebound to describe activity so far in 2021, but added midweek travel has been picking up. Since the pandemic, most hotel operators have been focused on luring weekend travelers, Anandani said.

Locally based H&B Hospitality Management owns four hotels in Ayrsley, in south Charlotte. First-quarter results have been at about 75% of what H&B budgeted for in October, which was already lower than prior projections, said Tyler Birchfield, company president and chief operating officer.

Occupancy has hovered close to 50% in recent months but ADR is diluted, with 95% of H&B's current business coming from leisure travel, he continued. Bookings are looking better for April and May but much remains to be seen.

"We see some good signs but we’re a little hesitant to uncork the champagne," Birchfield said.

Projects on hold

About a year ago, BPR Properties filed paperwork to obtain a building permit for a 208-room Moxy Hotel in uptown Charlotte. It was two weeks away from closing on a loan for the project.

The goal was to get the permit approved by May, secure financing, then break ground by July, right before the Republican National Convention, said Birju Patel.

Instead, lockdowns began, debt markets froze and BPR was shuttering hotels and furloughing employees.

And while BPR's 22 hotels have seen a solid rebound since the start of 2021 — even its uptown Embassy Suites is 80% to 90% booked on weekends — the Moxy remains on hold.

The outlook for new hotels remains largely iffy but there are still opportunities. Birju Patel said he closed on a loan two weeks ago to finance a new Homewood Suites in Greenville, North Carolina. The company has six hotels actively moving forward in its development pipeline.

But what's getting financed are smaller hotel deals — usually in the $15 million to $20 million range, with regional and community banks.

He said the large, institutional capital needed for a $60 million urban hotel project like the uptown Moxy still isn't financing those deals, in Charlotte or other urban cores.

"If the bank is not there to cut a $40 million loan, then you really have no option," Birju Patel said. "It’s going to be dependent on when the banks are comfortable loaning on urban hospitality product."

The Moxy isn't the only hotel project in Charlotte on hold. Construction of a 257-room InterContinental Hotel above the Carolina Theatre renovation project on North Tryon Street is paused indefinitely. An executive with the developer behind that project said traditional hotel construction debt has evaporated because of the pandemic.

So is OmShera's 135-room Courtyard by Marriott hotel planned for Dilworth, at East Worthington and Cleveland avenues, as reported by the Charlotte Ledger.

Similar to the Moxy, OmShera was getting everything lined up to break ground on the Dilworth hotel early last year, Anandani told the Charlotte Business Journal. Even with financing and permits in hand, the decision was made in the spring to wait and see where the market was headed as a result of the pandemic.

"The challenging thing is, you don’t know when the business travel is going to pick back up again," Anandani said. He doesn't yet know when the Courtyard could move forward but said several hotel developers are putting on hold, not canceling, projects.

Also on hold: a Homewood Suites in uptown's First Ward, next to LMC's apartment project, according to Axios Charlotte.

STR tracks hotel projects in major metros across the U.S. It's tracking 46 hotels in various stages of planning and development in Charlotte. Two are marked as deferred — the 125-room Hampton Inn & Suites Scaleybark Station and a 100-room Comfort Suites Charlotte.

Kurt Schoenhoff, principal at Verticore Commercial, works with hotel developers on site selection and advisory. He said some clients have access to financing and are looking to lock in sites in areas with high barriers to entry.

He said one uptown hotel is actually expected to begin construction in the third quarter of this year but declined to name the developer or project. In discussions are two boutique hotels in South End.

One of the most visible stalled projects is Mayfair Street Partners' Even Hotel project, near the corner of Stonewall and Caldwell streets in uptown. Site work on that 184-room hotel began in the second half of 2018 but construction has been at a standstill for roughly two years, well before the pandemic. The project had received a $28 million construction loan.

More than a dozen calls and emails to Simon Burgess, managing director of construction and development at Mayfair, asking about the project's status have been unsuccessful since construction came to a halt. Burgess recently told the Triad Business Journal, a sister publication of the CBJ, it was changing plans to build a hotel in that market to an apartment community instead.

That's a phenomenon happening locally, too. Blaze Partners and Argosy Real Estate Partners recently purchased a Homewood Suites hotel in the University area, which has permanently closed. The firms plan to convert the lodging units into apartments.

Future outlook cloudy

Long-term changes to how people work and travel, especially for business, are still unknown.

But economists and others believe the convenience and cost savings that have come from conducting business over Zoom will have post-pandemic ramifications on corporate travel. A Wall Street Journal analysis said business travel could be permanently reduced by 19% to 36%.

Birju Patel said he remains bullish on Charlotte's rebound and resiliency. But of all hotel markets the company operates in, Charlotte has lagged the most.

Unlike cities such as Jacksonville, Florida, or Savannah, Georgia, which have posted strong numbers for BPR, Charlotte still isn't viewed as a destination market. It may never be, he continued.

Add in possibly big changes in business travel and remote work, that might result in long-term muted uptown hotel business, even when the pandemic is behind us.

Vinay Patel said potential changes in how companies approach business travel is something he's thinking about, but a lot remains a wait-and-see game.

"We’ve got a lot of hotels that rely just on that," he said, including SREE's two uptown hotels and one in Ballantyne. The company is finishing a hotel in downtown Cincinnati, an area impacted similarly as uptown.

Birchfield said he's spoken with companies that frequently book rooms at H&B-owned hotels in Ayrsley, saying they've indicated pent-up demand and a desire to return to face-to-face meetings. That gives him hope there will be a rebound.

A return to corporate travel would also help boost lagging room rates. Much of the current activity in Charlotte is from travelers using Expedia and other booking sites to find deals on hotel rooms, Vinay Patel said. When large companies or executives start booking rooms for conventions or other activities, that's when rates should start to rise again, he continued.

Many operators are hoping for a return to group meetings and some convention activity — even if at a smaller scale than pre-Covid-19 — in the coming months. Several hotel owners said they've booked plane tickets and room reservations to attend a hotel conference in Atlanta in May, which will come with temperature checks and masks required for entry.

The Religious Conference Management Association recently held a conference at the uptown Charlotte Convention Center, the first event in the building since the scaled-back RNC in August. Karen Brand, a spokesperson for the Charlotte Regional Visitors Authority, which operates the convention center, said it was reduced in size to be in compliance with current capacity restrictions. The center has also hosted cheer competitions on back-to-back weekends following RCMA.

Between now and the end of the year, there are currently 10 conventions booked for the Charlotte Convention Center that include hotel room blocks, Brand said.

"We are in regular discussions with existing and potential customers about their events and under what circumstances we might be able to host them, recognizing this is a very dynamic environment," she said. "Of course, we are eager for meetings, conventions and events to resume and recognize that public health experts will guide us to how and when that can happen safely. The health of our residents and the health of our region’s economy are inextricably linked, and we are committed to safeguarding both."

A $127 million expansion of the Charlotte Convention Center is expected to be complete later this summer.

Brand also said there have been hundreds of standalone meetings, youth and amateur sporting events, and one- and two-hotel pieces of business throughout the course of a year that don’t use the center but generate demand for area hotels.

Schoenhoff said large meetings remain the big unknown. He said when hotel development returns, demand and interest will likely be in select-service, boutique and extended-stay hotels.

"I don’t foresee any appetite for hotel developers to build full-service hotels," he continued.

Long-term view

Pandemic impacts to the hotel industry have also resulted in millions of workers across the United States furloughed, laid off or working at reduced hours.

There were 141,000 leisure and hospitality workers in the Charlotte MSA as of February 2020, according to the U.S. Bureau of Labor Statistics. That dropped to 81,500 in April. In January 2021, there were about 113,000 working in the sector locally.

As evidenced by the data, pre-pandemic employment levels are still not back to what they were. Birju Patel said BPR had more than 1,000 employees before the pandemic, many of whom were furloughed last year. Today, it has less than 500.

Finding labor has been a challenge, and it's something he sees as a long-term issue.

"There has to be a rethinking of the hospitality industry," he said. "The business model has to change. It's a very labor-driven model, a very expensive model. We’re not finding the labor and it’s too expensive to run these hotels. If you’re not making a profit, you’re not going to see the industry survive too long."

At BPR, the company instated raises for all employees this year and a new minimum wage, although Birju Patel declined to say what rate.

Vinay Patel said SREE has about 900 employees. Instead of mass layoffs, the company cut hours for employees. Even though positions like hotel managers are generally back to full time, he said a lot of hourly employees are still on reduced hours.

Birchfield said H&B has used the pandemic to become more efficient as a company. What was considered break-even six months ago has been brought way down.

There have also been lessons learned. H&B used commercial mortgage-backed securities, or CMBS, debt to finance its hotels, something Birchfield said he didn't think the company will use again in the future. He said it's been very difficult to get any sort of reprieve from those contracts during the pandemic.

"It’s a true statement that good companies weather the storms and come out stronger," Birchfield said. "I think we’ll definitely be one of those companies that has learned a lot and will come out stronger on the other end."

Bank of America CEO urges Congress to help industries hit hardest by Covid-19

Bank of America Corp. CEO Brian Moynihan is calling for a federal stimulus package focused on helping those industries that rely on face-to-face interaction — and the people who work in those sectors — survive financially until after a Covid-19 vaccine is fully distributed.

Moynihan was the keynote speaker Monday for a Greater Boston Chamber of Commerce online event. The longtime Bank of America leader, a Boston-area resident, spoke on a range of subjects, including the bank’s diversity and inclusion efforts and the role that businesses can play in lifting people out of poverty.

Economists at Charlotte-based Bank of America project the U.S. economy should recover fully from the pandemic by the beginning of 2022, which is sooner than they had predicted earlier in the crisis, according to Moynihan. While a vaccine could be available on a limited basis as soon as this month, it could take well into 2021 for the vaccines to be widely distributed, he said.

In the meantime, the federal government should provide funding to the hotel, restaurant, airline and other sectors, including the nonprofit world, that require consumers to be physically present, Moynihan said. That should include large companies in those industries that are in need of aid, he said.

Workers in those industries should also have their unemployment pay supplemented, “to allow people to maintain a standard of living and allow them to keep going, so they're ready to be employed on the other side of this,” he said.

“We should have a stimulus aimed to help those people continue to get across the bridge to the other side of the river,” Moynihan said.

For businesses, such a package would differ from the Coronavirus Aid, Relief and Economic Security (CARES) Act passed in the spring. Initiatives like the Paycheck Protection Program (PPP) were open to firms in every sector.

A sequel to the CARES Act has been under discussion since the summer, but Democrats and Republicans have failed to come to a consensus on issues like state aid, liability protection for businesses and the size of the legislative package. Possibilities have ranged from the hundreds of billions of dollars, to the trillions of dollars.

Asked how large the package should be, Moynihan demurred, saying “I'm not sure it has to be as big as some people say,” but “it has to be bigger than the lowest numbers.”

“By the way, if it's not enough, we should come back and do it again. I think the debate about what it could be, it's not the right debate, the debate is to get the money flowing to keep the economy running,” he said.

Moynihan did, however, say that lawmakers should not allow concerns about the national debt to hold back the size of the legislation.

“It’s just not the time to be distracted by that,” Moynihan said. “We have to solve this problem to get the economy back to the size it was, get the unemployment back down. It's a human question. Are you willing to borrow from the future, to take care of the human question.”

He added that there’s still a lot of unspent money approved through the CARES Act.

As for new aid for state governments, “to the extent people spent money that was not planned for these (Covid-related) purposes, I think they should get some help," Moynihan said. "I am not a big believer that this should be used to cover up other fiscal issues.”

A Former Bellman's Perspective on RNC Loss

by Vince Chelena, CAHA Executive Director

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While the two political sides pat themselves on the backs for a high profile standoff over a Republican National Convention scheduled to be in Charlotte later this summer, I’m giving voice to a group of workers in our industry rarely heard, seen, or thought of by those in power. The media, the politicians, and yes, even our industry, talks about tourism and hospitality as “the hotels” and “the restaurants”. It’s time we look inside the buildings and talk about the people who make our attractions, destinations, and businesses work.

These essential workers are restaurant servers and cooks who arrive at work in the wee hours of the morning to prepare meals for our guests. They are the front desk clerks in our hotels who are the faces of our hotels around the clock. They are also waiters, attendants in our parking lots, bartenders, hotel housekeepers, drivers, and bellhops, a job that gave me entrance into an industry that has defined my professional life to this day.

I started my career in 1979 as a hotel bellman in Atlanta that paid a minimum wage plus tips — tips that put food on my table when I was fortunate enough to get 40 hours of work. However, if it was slow in the city, I was lucky to get by on 20 hours. Bigger events meant hotel doors were swinging open, and I was shuttling more bags to and from hotel rooms, and saving for the lean weeks.

There are 141,000 hospitality employees in the greater Charlotte area, including the surrounding counties. All were counting on our political leaders to bring a $250 million political convention to our area, but they were failed miserably by the politicians and now face a week in August that will be a lot harder to make ends meet.

I understand the debate over the RNC in Charlotte is more than just economics. The health and safety of our community, and these workers, is worthy of a robust debate. However, it was my sincere hope that the politicians would come to the table, put these hardworking employees’ economic interests as a priority in negotiations, and get a deal worked out.

As the political pundits list winners and losers of this disagreement over the RNC, I contend there are no real winners, and at least 141,000 losers .

This former bellman encourages both political sides to make this right and to get these workers a win. 

Will Trump tweet kill Charlotte tourism sector's bid to save the RNC?

In less than three months, the Republican National Convention is, for the moment anyway, scheduled to bring 50,000 visitors and $121 million worth of related spending to Charlotte.

But, on Tuesday night, just after 9 p.m., President Donald Trump seemed to put a dagger in the city’s prospects of keeping the convention.

He concluded a series of tweets by writing, “Because of @NC_Governor, we are now forced to seek another State to host the 2020 Republican National Convention.” He attributed the decision to pursue an alternate site to N.C. Gov. Roy Cooper’s “Shelter-in-Place Mode, and not allowing us to occupy the arena as originally anticipated and promised.”

The convention was awarded 20 months before the Covid-19 pandemic shut down much of the American economy and ushered in strict limits on crowds to reduce virus spread. 

Within an hour, Cooper fired back on Twitter. “We have been committed to a safe RNC convention in North Carolina and it’s unfortunate they never agreed to scale down and make changes to keep people safe,” the governor wrote. “Protecting public health and safety during this pandemic is a priority.”

Tourism industry executives and advocates said throughout the day Tuesday they still believe Charlotte has a chance to keep the RNC here this summer despite the threats to relocate, but their confidence is, to put it mildly, shaken.

Vinay Patel, principal at locally based SREE Hotels, reflected the somber mood within the industry Tuesday as the possibility reverberated for losing what he called “a lifeline” for the battered economy. 

“I’m kind of disappointed,” Patel told CBJ, with resignation in his voice. “Everybody talks about [the impact on] hospitality. It’s much bigger than that. It’s city and state tax coffers; it’s the police department; it’s event planners.”

His reference to the police department centered on a $50 million federal grant to buy additional equipment, pay officers overtime and bring in additional help to provide security during the RNC.

SREE Hotels owns 24 hotels in the Carolinas and Ohio. Twelve are in the Charlotte area, encompassing 1,700 rooms. All are booked for the RNC, Patel said. Even after Trump’s tweet, Patel held out hope, telling CBJ that seeking another site doesn’t equate to a completed negotiation for an event that has been two years in the planning here.

“We have fought hard and long for this convention and we absolutely are not giving up yet,” said Mohammad Jenatian, Greater Charlotte Hospitality & Tourism Alliance president. “Despite all the different statements, at least the RNC and the governor are now communicating, which gives all of us hope.”

The city of Charlotte released a statement late Tuesday: "We have yet to receive any official notification from the Republican National Committee regarding its intent for the location of the convention. We have a contract in place with the RNC to host the convention and the City Attorney will be in contact with the attorneys for the RNC to understand their full intentions."

Mayor Vi Lyles, the Charlotte Regional Visitors Authority and the Charlotte Regional Business Alliance did not respond to requests for comment.

Just before Trump tweeted Tuesday, Patel sent a series of text messages to the mayor and seven council members scolding them for the possible loss of the convention.

“I am shocked that we as a city have not fought harder for all the tax revenue, jobs and [benefits the convention would bring]. I have to look at the hundreds of hourly employees that work for our company in there (sic) eyes and tell them that the light that they were looking forward to at the end of the tunnel will not be there ...”

The pandemic arrived in March and led to local and state-wide stay-at-home orders, shuttering many businesses while bringing hotel, restaurant and airline sales to a halt. According to state data released last week, leisure and hospitality sector jobs accounted for 34% of Mecklenburg’s lost jobs in March and 17% in April, or nearly 25,000 combined for those two months.

Helping the surviving but damaged businesses hang on was the main topic executives and civic boosters seized upon when asked about the fortunes of the Republican convention in a Democratic-majority city.

“My message to the RNC is please, on behalf of the 10,000 small businesses in Charlotte and the reeling hospitality industry, please stay at the table and operate in good faith to bring this to our city that needs this now more than ever,” Republican councilman Tariq Bokhari told CBJ.

Nine of the 11 council members are Democrats. Their predecessors — also a 9-2 Democratic majority — approved bringing the convention to Charlotte by a 6-5 vote in July 2018.

Malcolm Graham, a council Democrat who was not part of council in 2018, told CBJ during recent interviews that he is leery of any mass-crowd events taking place in Charlotte this summer. It would be irresponsible to risk spreading the novel coronavirus at a time when the state’s phased reopening order allows for a maximum of 10 people gathering indoors and 25 outdoors.

Those limits are likely to be relaxed later this month when phase three is enacted, but state officials have declined to speculate on when large-scale venues such as arenas, stadiums and amphitheaters could reopen. Currently, restaurants and stores must limit capacity to 50% of normal levels. Going from 10 people to 19,000 in a span of two months seems ambitious, to say the least.

A city government source told CBJ the city has spent at least $5 million to $10 million on RNC preparation so far. The convention contract is between the Republican National Committee, city and county government and the Charlotte Regional Visitors Authority.

Throughout previous council debates about the RNC — including whether the city could end the agreement — the city attorney has consistently said it would breach contract terms. Trump is not a party to the contract. 

In addition, the agreement specifies that the event will be governed by all applicable state laws. That, in effect, means Cooper, a Democrat, retains ultimate authority on public health decisions, including capacity limits.

The convention contract doesn’t include a force majeure clause, the act of God provision in some agreements allowing for an agreement to go unfulfilled due to unforeseen, extraordinary circumstances, such as a hurricane. Then, too, there is the question of whether the pandemic could be considered force majeure under the circumstances likely to face the RNC: not a cancellation but a reduction in the scope of the event. 

The RNC contract mostly boils down to the local government entities providing security and venues for the convention — but does not make guarantees on how many people will attend or participate. Cooper said in his letter and again during a news conference Tuesday that the pandemic and shifting health conditions preclude making any guarantees about capacity. Trump and RNC executives have spent the past week requesting confirmation of a full-capacity event.

When asked Tuesday what capacity levels would be acceptable, Cooper said the state doesn’t have a specific number in mind. Instead, his administration will rely on trends in Covid-19 cases, virus-related deaths, hospitalizations and testing and tracing capabilities before establishing RNC safety protocols, including crowd size and social distancing.

RNC executives previously acknowledged the likelihood of pandemic-related precautions necessitating changes at the convention venues, including face coverings, but their tone and stance changed after Trump’s tweets.

“I think there’s still a certain amount of posturing going on,” Republican councilman Ed Driggs said. “I think what they’ll end up with [if the convention moves] is either a smaller convention [elsewhere] that they could have had here or, if they try to do a full-blown convention, they’ve got to get all the hotel rooms and all the other things in place. That is an incredibly tight timeframe.”

Driggs said it remains uncertain to him “whether [the RNC is] serious” about moving the convention.

Spectrum Center, the city-owned NBA arena, is the main venue for the prime-time TV speeches, including Trump’s anticipated re-nomination and bid for a second term.

Earlier Tuesday, the back and forth escalated between the RNC and Cooper. At issue: requirements for cutting capacity at the arena and other public health precautions likely to be mandated because of the Covid-19 pandemic.

“We had appreciated your earlier acknowledgments that a successful and safe convention would need to be scaled back to protect the health of participants as well as North Carolinians,” Cooper, a Democrat, wrote in a letter sent Tuesday to convention CEO Marcia Lee Kelly and RNC chairwoman Ronna McDaniel. “Unfortunately, it appears that has now changed.”

Kelly and McDaniel on Saturday sought “guidance” from Cooper and North Carolina by June 3 on whether a full-capacity convention could be staged. Before Cooper’s response was publicly released, Politico reported earlier Tuesday that the RNC is considering Nashville, Orlando and Las Vegas, among other cities, as possible host sites. Trump and the RNC want what they have described as a traditional convention setting with a capacity crowd in attendance.

McDaniel issued a statement soon after, saying, “We hope to still conduct the business of our convention in Charlotte, but we have an obligation to our delegates and nominee to begin visiting the multiple cities and states who have reached out in recent days about hosting an historic event to show that America is open for business.”

Those involved in the lengthy run-up to the RNC said the event is so large that they can’t stop preparations unless and until a relocation becomes official.

“If it’s canceled, we stop,” said Michael Smith, CEO of Charlotte Center City Partners. 

The uptown nonprofit is responsible for helping coordinate an ambassadors program to assist delegates, reporters and other visitors around town. Center City Partners is also spearheading a public relations campaign aimed at promoting the city’s business climate and quality of life during and after the convention.

The nonpartisan local organizing committee led by former Republican councilman John Lassiter continues its work, including a fund-raising campaign to pay for staging at the arena and other expenses. The target: $70 million. Lassiter confirmed in a text message Tuesday that more than $50 million has been raised but did not answer a question about Cooper’s letter to RNC leaders declining to guarantee a full-scale convention.

The standoff arrived as the number of Covid-19 cases in Charlotte and across North Carolina continue to increase. Mandy Cohen and Gibbie Harris, who, respectively, lead the state and county health departments, have said this week that while the growth in cases is not a surge, it does warrant concern because the higher numbers represent more disease spread than anticipated after accounting for a major expansion in testing capacity.

Mecklenburg County continues to have the most Covid-19 cases in North Carolina with 4,354 since March, including 97 virus-related deaths.

Read the full article here

Governor tells RNC in letter that full-capacity Charlotte convention is 'very unlikely'

Gov. Roy Cooper on Tuesday formally responded to Republican National Convention officials, saying a full-scale convention in Charlotte this summer is "very unlikely," given the Covid-19 pandemic.

In a letter sent to Cooper this weekend, Ronna McDaniel, chairwoman of the Republican National Committee, and Marcia Lee Kelly, CEO of the 2020 Republican National Convention, told Cooper they sought assurances that a "full convention" entailing 19,000 individuals would be allowed inside the Spectrum Center. The uptown arena is expected to be the site of most RNC events and activities.

The RNC was awarded to Charlotte two years ago and is scheduled to run Aug. 24-27. But the current global health crisis has resulted in businesses shuttered and mass cancelations of events as restrictions on gatherings remain across the state and country. Some 50,000 people have previously been estimated to attend this year's RNC, including delegates, media and other visitors.

In his response Tuesday, Cooper referenced "earlier acknowledgements" made by RNC leaders that "a successful and safe convention would need to be scaled back to protect the health of participants as well as North Carolinians." Kelly told reporters during an RNC media event in April that while the RNC was moving “full steam ahead," it would likely look different because of health precautions, including delegates and other attendees wearing face coverings.

"Unfortunately, it appears that has now changed," Cooper wrote. "We still want a safe RNC convention in Charlotte that follows the health guidelines set forth in the (Center for Disease Control's) interim guidance regarding mass gatherings."

Cooper went on to say that, in conversations with President Donald Trump, he has commended him for not holding political rallies since March "because of the serious health risk that they would cause."

In tweets sent Memorial Day weekend, Trump threatened to pull the convention from Charlotte if capacity limits would not allow Republicans to host a full-scale convention. The letter sent by McDaniel and Kelly this weekend gave a June 3 deadline for assurances that a full convention could be held in Charlotte in late August.

A Politico report early Tuesday said RNC officials are exploring other cities for possible alternate convention sites, including Nashville, Tennessee; Orlando, Florida; and Las Vegas.

McDaniel said in a statement Tuesday the RNC has "an obligation to our delegates and nominee" to begin visiting multiple cities and states that have reached out about hosting the event.

"We have now communicated to Gov. Cooper's office multiple times that we would like to showcase Charlotte and the wonderful state of North Carolina to the world by hosting the convention we contracted for nearly two years ago," McDaniel said. "It is unfortunate that the governor is dragging his feet on giving us any guidance as to how to move forward with plans to safely conduct our convention while generating hundreds of millions of dollars of revenue for the people of Charlotte and North Carolina."

An RNC spokeswoman said the convention "intends to conduct the business of the Republican party" in Charlotte and "will continue to make health and safety a top priority."

North Carolina is in phase 2 of Cooper's Covid-19 economic reopening plan, which limits mass gatherings to 10 people indoors and 25 outdoors. Restaurants, breweries and salons have been allowed to reopen, but at 50% capacity and with new protocols in place. Phase 2 is expected to run through the end of June at minimum.

Bars and event spaces are among the businesses not allowed to reopen in phase 2 restrictions. McDaniel and Kelly said in their letter that hotels, bars and restaurants should be permitted to operate at full capacity during the RNC.

"We are happy to continue talking to you about what a scaled-down convention would look like and we still await your proposed plan for that," Cooper wrote Tuesday. "We also await answers to the safety questions posed by our state Health and Human Services secretary, specifically regarding social distancing and face coverings.

"With the nation, the state of North Carolina and the city of Charlotte still under states of emergency, it's important to conduct the RNC convention accordingly," Cooper said. "As much as we want the conditions surrounding Covid-19 to be favorable enough for you to hold the convention you describe in late August, it is very unlikely. Neither public health officials nor I will risk the health and safety of North Carolinians by providing the guarantee you seek."

Fresh concerns about RNC as Trump threatens military action in response to protests

It seems likely that organizers of the upcoming Republican National Convention will be disappointed with the response from North Carolina's top health official on "safety protocols" and plans submitted last week for the four-day event slated to be held here in August. The Charlotte Observer reports Dr. Mandy Cohen, secretary of the N.C. Department of Health and Human Services, signaled in comments to reporters yesterday that she will reject the RNC's request to fill Spectrum Center with 19,000 attendees, sans masks and social distancing.

Cohen had asked the party to plan for multiple scenarios in case the evolving Covid-19 situation doesn't allow for a crowded, indoor event. Her written response, expected soon, would be the latest in a series of back-and-forth communications between local officials and those in charge of the convention that started with President Donald Trump's threat on Memorial Day to move the RNC if he can't have full capacity. Over the weekend, the top executives behind the event — Ronna McDaniel, chair of the Republican National Committee, and Marcia Lee Kelly, CEO of the 2020 Republican National Convention — said that, if the state doesn't provide assurances by tomorrow, organizers will “immediately need to begin making modifications as to how the convention will proceed.” 

However, with Trump ramping up his law-and-order rhetoric yesterday with a threat to deploy the military in U.S. cities amid widespread unrest over racial injustice and police brutality, there's more than the coronavirus pandemic to consider. In recent days, the president has tweeted about shooting looters and using "vicious dogs" against protesters, evoking imagery of violent conflicts during the Civil Rights era.

“Given the complexity and potential for violence, social distancing will be the least of our issues,” Chris Swecker, a former FBI official, told the Observer for a separate report. He believes the Charlotte-Mecklenburg Police Department is up to the challenge, considering the agency's experience with the Democratic National Convention in 2012 and the NBA All-Star Game in 2019, among other major events.

Rev. Rodney Sadler, who leads the Center for Social Justice and Reconciliation at Charlotte’s Union Presbyterian Seminary, disagrees with that sentiment. He has been on the streets for some of the protests and offered a different view.

“I’ve seen people who have been inciting violence and who were incredibly aggressive against the police. I don’t recognize these people and I’ve been around the activist community for some time,” Sadler told the daily newspaper: “The (Charlotte) police department is not ready to handle the kind of disruption we will see when all the activists that are causing trouble around the country — the violent people — decide to come to Charlotte (to protest the GOP convention).”

The potential for violence as well as racist remarks by Trump have been among concerns for leaders in Charlotte since the city agreed in 2018 to host the convention.

Meanwhile, marching continued for a fourth day in the Queen City as hundreds of people gathered at Freedom Park before taking to the streets of Dilworth and Myers Park — among the most affluent residential neighborhoods in town. Two Carolina Panthers players joined in the demonstration, as did some of the residents along the route. Later, a smaller crowd returned to uptown, where the Observer reports one person was arrested.

Republican leaders in the N.C. General Assembly have criticized Gov. Roy Cooper's response to the unrest, calling for the deployment of National Guard troops and curfews to quell rioting.

"Let me be clear about one thing: People are more important than property. Black Lives do Matter," Cooper, a Democrat, said Sunday. He has authorized the National Guard, though troops have not been deployed, and urged protesters to remain peaceful.

As debut of Grand Bohemian pushed back again, luxury hotel anticipates softer bookings amid Covid-19

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The Grand Bohemian Hotel Charlotte is targeting a July 1 opening in uptown.

The $110 million, luxury boutique hotel initially expected to open in mid-April, but the spread of the novel coronavirus forced it to push back those plans.

“Obviously, we’re watching the trends and everything that’s happening. A lot can transpire over the next six weeks,”says Mark Kessler, president and chief operating officer of Kessler Collection Design & Development. 

The Kessler Collection is developing that 254-room hotel, which will feature 16,000-plus square feet of indoor and outdoor event space. It sits on a 0.6-acre site next to the Carillon Tower at Trade and Church streets.

The Grand Bohemian flag is part of Marriott International Inc.’s Autograph Collection.

The uptown facility has been issued its temporary certificate of occupancy and is working on punch-list items at this point. A management team has been hired, with remaining positions to be filled about three weeks before opening.

“We basically just pressed pause,” Kessler says.

That decision came as travel slowed and the hotel group was forced to lay off the majority of its 1,200 employees across its nine properties in operation. The goal is to begin reopening those sites in mid-May.

In addition to Charlotte, it will open a hotel in Savannah this summer and has another property under construction in Greenville, South Carolina. Kessler

Collection worked with lenders on the Charlotte project to increase its loans for pre-opening costs and cover expenses in Charlotte.

“There certainly is a cost. We’re not going to open to the same business levels we anticipated,” he says. “Certainly this is not what anybody wanted at this point.”

People continue to book getaways — and regional markets that are within driving distance are poised to rebound quicker, Kessler says. The Grand Bohemian also has the benefit of being the newest product to open in the market.

“People will want to stay with us," he says.

That should help offset drops in business travel. It’s also booked for the Republican National Convention at the end of August.

Kessler says state and local guidelines surrounding Covid-19 will impact when the hotel’s restaurant and other facilities open.

That list includes restaurant, Mico, which will dish up South American flavors with a Mediterranean influence. There also will be a rooftop bar and lounge, called Buho, that focuses on hand-crafted, innovative cocktails, as well as a Starbucks coffee shop.

“Our goal is to open all, when we open,” he adds.

NEWSMAKER: Charlotte's top tourism executive gives his take on industry's recovery

For hotels, restaurants and other hospitality-related businesses, the steep cost of the coronavirus pandemic is spelled out by public health mandates. Stay-at-home orders are necessary to limit community spread of the incurable virus — and especially devastating to businesses that depend on people socializing.

By early March, when the Covid-19 virus had already caused companies to shutter corporate travel, hotels in Charlotte and across the country saw their reservations dissipate almost overnight. For the month, local hotels generated half as much revenue compared with the same period in 2019, according to industry tracking firm STR.

And the immediate future looks just as bad. 

“Our hotels literally dropped 90% across the board,” SREE Hotels Principal Vinay Patel told a city task force on small-business recovery this week. SREE is a locally based company that owns 24 hotels, including 12 in the Charlotte region.

To cope, hotels and restaurants have closed, reduced business hours, cut pay, shed jobs, enacted furloughs or a combination of all of the above. Among the local layoffs, according to state filings: BLT Steak, 57 jobs; Crowne Plaza Charlotte Executive Park, 85; Great Wolf Lodge, 254; Hilton Charlotte Center City, 163; and airport concessionaire HMSHost, 815.

Marcus Jones, the city manager, told council earlier this month that hospitality tax revenue will likely be off by 85% through mid-summer, with an anticipated gradual recovery that won’t see a return to normal levels before the spring of 2021.

For the current budget year, ending June 30, the city estimated tourism tax revenue of $60 million, or a 9% gain from $55.1 million in fiscal 2019. Revised figures have not yet been disclosed.

Taxes on hotel rooms, restaurant meals and rental cars are the lifeblood of the Charlotte Regional Visitors Authority. City government and the visitors authority use that revenue to pay for tourism and convention marketing and recruiting as well as construction debt, maintenance and operating costs on various publicly owned venues — all responsibilities that fall to the visitors authority.

Jones did have one piece of good news regarding tourism funds. He told council that reserve debt funds will allow for all existing and approved projects to continue being repaid, including the NASCAR Hall of Fame, the Charlotte Convention Center and the Spectrum Center.

Mayor Vi Lyles has said several times in recent weeks that the hospitality industry is a primary concern for her in economic recovery efforts. Hospitality accounts for one out of every nine jobs in the region, according to federal labor data.

Site selection, corporate relocations sure to change with Covid-19. Could Charlotte stand to benefit? 

Murray spoke to the Charlotte Business Journal this week about the challenges ahead, hopes to stage the Republican National Convention as scheduled in August and the importance of regional tourism in a post-pandemic world. Questions and answers have been lightly edited for context and clarity.

What’s your assessment of the industry now and where do you see things going in such an unpredictable time?

It was easy to understand where we would be once we decided that we would ask people to stay at home and shut down business when our business depends on people traveling and getting out to restaurants and bars and meeting in large groups. I don’t think there’s any surprise that we’re operating at incredibly low levels and only essential travel is happening.

Looking through today’s lenses, the statistics show that we shut down the business — and we did. What’s a little surprising is that there are still people staying in hotels and traveling. Those are largely people that are essential travelers, (like) people that are driving trucks and stopping off to stay (overnight). The hotels are running 20% occupancies. There’s very little uptown, it’s more in these economy-type hotels or mid-scale hotels.

The good news is we’re looking into the future now. As the virus becomes more and more contained and as we start easing restrictions, it will start to be easier to see how our business recovers. 

What are some of the possibilities?

Probably different parts of our industry will recover at different times. The large groups, meetings and events business, obviously, will be last to figure that out. It’s not sure how fast all that will happen but, at some point, we know that we’ll get back to business as we’ve experienced in the past.

Mayor Lyles has spoken about the need to take additional steps to help hotels and restaurants in particular. What have you heard from her or the city about some possible recovery ideas and plans?

For us, I think what we can do best is be prepared to drive travel once it’s appropriate. We’ve been doing exactly that: The team has been busy gearing up for what will happen after we get through the shutdown, particularly on the marketing end.

We’re excited about that travel demand because of our history of being able to drive demand through our marketing. [The visitors authority will focus on 12 cities within a 250-mile drive, including Nashville, Tennessee; Raleigh; Durham; Greenville, South Carolina; Spartanburg, South Carolina; Columbia, South Carolina; Charleston, South Carolina; Atlanta and Richmond, Virginia. Two-thirds of leisure visitors already come here from within a 300-mile radius.]

Research tells us that people will be more likely to drive than fly and we are more likely to benefit from the market that we normally speak to, a 250- to 300-mile drive radius. Last year, 2019, our marketing drove $670 million of impact into our market. We know we can do that.

What about conventions?

Our sales team has been working really hard at rescheduling business that was scheduled for the end of March, April and May and re-booking into this year. The good news for us is, today, if all the business that we have booked into the future shows up and the virus goes away, we will exceed our long-range forecasts for this year given that we expected to be down a bit because we’re under construction (as part of a $127 million expansion).

Just about all of our space in the fall is full. We’ll have to judge and see whether people are willing to travel to meetings by the time the fall comes around but when travelers are ready, we’ll have a good head start. In the longer range, our booking pace is ahead of where we were historically and part of that has to do with the new meeting space we currently have under construction (scheduled to open in 2021).

What will conventions look like going forward?

Our team is thinking about how we would set up rooms (if social distancing is required), how we would serve food, how we would protect employees, how we would protect customers. My guess is we’ll transition slowly over the summer and, at some point, those measures may no longer be required. Hopefully, that is by the fall, but we’ll see.

 With the hospitality taxes going down, how does that affect the visitors authority?

The way we model tourism taxes into the future takes into account black swan-like events in terms of major crises. And all of the research that we’ve done tells us we will come out of this crisis like we have with other major ones.

There were some pretty impressive tax collections prior to this and those will be offset by the losses we’re having in the March-April-May-June (period) and maybe even into the fall.

The funds will be strong into the long term. In the short term, the collections will be down, but these funds are not about three months of collections or six months of collections.

From us, we take a small portion of the funds for the convention center, for operations and for marketing our city. There are also investments we make into capital. We’re under construction with the convention center expansion and we’re just finishing up The Connector facility (a $20 million, 35,000-square-foot addition that bridges Bojangles’ Coliseum and Ovens Auditorium).

Any layoffs or pay cuts?

To date, we have retained all of our full-time employees and the large majority of them are working from home. Our sales team has been inundated with new business but also dealing with rescheduling old business and our marketing team has been working on our efforts to come out of this.

So, for the most part, the full-time are being paid. The part-time employees are being paid as part of a temporary pay plan that takes their average hours over the last six months and pays them a portion of those hours. [CRVA has 1,200 full- and part-time employees.]

Will you need to dip into your reserves because of this?

As far as the strength of the CRVA’s balance sheet, the good news is that we’ve had a good run over the last number of years and we’ve built up a reserve like the city has done, which is 16% of operating costs.

But then we went beyond that and built up a rainy-day reserve fund. We’ll definitely eat into that reserve substantially, but we still think we’ll be able to have the fund balance above 16%. [The fund balance was $21 million at the end of February and projected at that time to decrease to $15 million, or $1.5 million below earlier forecasts of $16.5 million, by the end of fiscal 2020 on June 30. A 16% reserve is equal to $10 million.] I think we’re in good financial position.

What’s your confidence in the RNC taking place as scheduled in August?

It takes an incredible amount of prior planning and a lot of that has happened to date. The teams are all working diligently as if this is going forward. (The RNC) has suggested it is full steam ahead and they expect to have it. I can’t predict what the virus will do, but I would hope that if we recover quickly it might be a way for us and Milwaukee (the Democratic National Convention site) to show that large-scale meetings can be healthy again. That’s an opportunity and if it’s possible, I think that will certainly be a big boost to the industry. August is still some bit away and things are changing dramatically. If we’re able to have meetings, our books are full … We’re waiting till the experts tells us that it’s okay to move forward.

As hotels plead for 'second' stimulus, Charlotte stares down $1.39B in likely loan defaults

The hotel industry is warning it will default on at least $86 billion in collateralized loans within the next several months and deliver another financial shock to the U.S. economy without more intervention by the federal government, above and beyond the $2 trillion coronavirus bailout package just signed into law by President Donald Trump.

In a March 27 letter addressed to a host of federal regulators, the heads of the American Hotel and Lodging Association and Asian American Hotel Owners Association said the industry's "unprecedented cash flow crisis" brought on by the COVID-19 pandemic requires a separate financial lifeline as well as special protections from the sector's legions of lenders and loan servicers. The letter specifically seeks relief in the so-called non-agency collateralized mortgage-backed securities, or CMBS, market, a stomping ground for Wall Street's biggest lenders and a source for billions of loans to hotel owners throughout the United States.

"Many hotels are unable to pay operating costs and thus debt service," wrote AHLA President Chip Rogers and AAHOA President Cecil Staton in their letter to the U.S. Treasury, Federal Reserve and Securities and Exchange Commission. "This will cause a snowball effect of foreclosures followed by lenders taking ownership of severely distressed assets with no ability to operate them.”

The industry groups seek an unspecified amount of "liquidity" from Treasury and the Fed to enable hotel owners to stay current, and they have asked the SEC to temporarily remove some of the regulatory and credit-ratings requirements that under normal circumstances would force lenders and loan servicers to advance foreclosures due to nonpayment. They estimate seven in 10 hotel rooms now sit empty and that the industry stands to lose $3.5 billion in room revenue each week the crisis persists.

Whereas traditional lenders such as local and regional banks have proven willing to work with hotel owners in navigating the coronavirus crisis, the CMBS market presents a particularly challenging environment for borrowers to navigate, said Randy Meyer, chief financial officer for The Hotel Group in Edmonds, Washington. He said the CMBS market's extensive legal and contract obligations, as well as the hierarchical way in which it is managed, makes it less responsive and far less flexible when dealing with borrowers during a crisis.

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The concern, Meyer said, is without federal intervention everyone from hotel owners to real estate investors to the pension funds that own securities in CMBS portfolios will be rocked beyond the losses already tallied since the coronavirus crisis unfolded. Meyer predicted a wave of foreclosures and a fire sale of properties if things continue as is. He said billions in equity, much of it built up by families and property owners over generations, would be wiped out.

"It's a potentially catastrophic scenario," said Meyer, noting that nine of his company's properties have shut down and that similar moves might be in store for its remaining properties if the expanding states of quarantine and social distancing persist or worsen.

Big hotel debts ... and another big bailout?

An American City Business Journals analysis identified approximately 8,000 U.S. hotels with $85.6 billion in CMBS loans outstanding as of this month, with an average loan balance of $10.7 million per property. The hotel industry estimates there is another $220 billion in traditional mortgage debt supporting hospitality and lodging properties nationally.

Without federal intervention and relief, industry experts say the carnage will be widespread and result in a state of instability in business and tourism centers for years to come.

The Charlotte-Concord-Gastonia metropolitan statistical area has about $1.39 billion in CMBS loan balance in 114 hotel properties — the 10th highest MSA evaluated by ACBJ, parent company of the Charlotte Business Journal. The average debt per hotel property in the Charlotte MSA is $12.2 million.

Some of that debt is carried in large national portfolios with hundreds of millions in loan balances.

Locally, CMBS hotel properties include a mix of flags and submarkets, including several prominent uptown hotels such as the Marriott Charlotte City Center. A number of hotels near Charlotte Douglas International Airport — DoubleTree by Hilton Hotel Charlotte Airport, Hampton Inn & Suites Charlotte Airport and Hilton Garden Inn Charlotte Airport Hotel, among others — are included.

The 207-room DoubleTree by Hilton Hotel Charlotte-SouthPark Mall, at 6300 Morrison Blvd., has a loan balance of $30 million across multiple CMBS portfolios.

The Marriott Charlotte City Center hotel, which underwent a $40 million renovation in 2016, was acquired by a non-traded REIT of W.P. Carey (NYSE: WPC) in 2017 for $170 million. It has an outstanding balance of $103 million in multiple loans.

And The Ballantyne, one of Charlotte’s most prestigious hotels, has an outstanding loan balance of $55 million. The hotel, acquired in 2017 as part of Northwood Investors’ blockbuster Ballantyne deal, also underwent a multimillion-dollar renovation less than two years ago.

In the Miami-Fort Lauderdale metro, some 185 properties backing $5.2 billion in CMBS debt hangs in the balance. Affected properties include some of Miami Beach's most prominent oceanfront hotels, including The Fontainebleau and Edon Roc, as well as dozens of smaller sites operating under national flags ranging from Holiday Inn to Aloft to Homewood Suites.

With 271 properties securing $2.7 billion in loans, the Dallas-Fort Worth metro has the most CMBS-financed hotel properties. Houston ranks second with 222 properties financed with $1.4 billion in outstanding CMBS debt. Included in those lists of properties are Sheratons, Hiltons, Crowne Plazas and virtually every other major hotel brand in America.

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As of 2018, the hotel sector employed about 1.5 million people and supported roughly $43.6 billion in annual payroll. That worked out to just over $29,000 per year, per worker, or about $118 million in U.S. wages each day.

In the Charlotte region, 11,378 are employed in the hotel industry, with an annual payroll of $250.4 million, according to U.S. Census data from 2018.

A spokesman for the AHLA said Treasury, the Fed and SEC acknowledged receipt of its letter. The hotel group, which includes 19,500 members who collectively own approximately half the nation's 55,000 hospitality properties, said it intends to further engage with regulators this week. The industry group ranked among the largest lobbying organizations in Washington, D.C., last year, recording $3.15M in spending, according to OpenSecrets.org.