As CT’s hotel market recovers from pandemic, new development pipeline grows; aging properties face re-think

CONTRIBUTED PHOTO Gary Desai, of Berlin-based Lotus Hospitality, opened a new extended-stay Home2 Suites by Hilton hotel in East Haven.

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By Hanna Snyder Gambini

Connecticut’s hotel and hospitality industry was one of the sectors hit hardest by the pandemic, but it’s slowly returning to pre-COVID levels, kick-starting demand for new hotel construction, industry experts said.

Meantime, operators and developers are working to find new uses for large-scale, traditional hotels that have become obsolete, while there’s a greater focus on alternative offerings such as extended-stay and boutique-style lodging.

Gary Desai, president of Berlin-based hotel management and development company Lotus Hospitality, opened a new extended-stay Home2 Suites by Hilton hotel in East Haven last month, the first of that brand to debut in the state, he said. A few weeks later, another new Home2 Suites, under separate ownership, opened in Bristol.

More than 30 hotels, ranging in size from six to 550 rooms, are in the development pipeline for Connecticut, according to commercial real estate data provider CoStar. If they all get built, it would add more than 3,600 rooms to the market over the coming years.

Among the newest projects to be announced is a 135-room Residence Inn by Marriott, which will be located in Bridgeport’s Steelpointe Harbor development. Construction on that hotel, being led by a partnership between True North Hotel Group Inc. and Bridgeport Landing Development, is slated to begin next year.

‘Built for different times’

Lotus Hospitality’s new Home2 Suites by Hilton, at 30 Frontage Road, features 103 suites and meeting space, on the East Haven line, about a 10-minute drive to downtown New Haven, Yale University and Yale New Haven Hospital.

The project had been in the works since 2018, but the pandemic delayed its start. Desai said he’s bullish about the new property because New Haven’s burgeoning biotech industry, Yale University and many construction projects in and around the Elm City have driven up demand for extended-stay lodging.

“They are unique in that they provide suites for leisure and business travel, for an overnight or extended stay, and we’re also pet friendly,” he said.

Ginny Kozlowski

New Haven has been underserved in the extended-stay hotel market, said Ginny Kozlowski, executive director of the Connecticut Lodging Association and New Haven’s Economic Development Commission.

Meanwhile, Kozlowski said she gets calls from developers looking at hotel properties, but with an eye toward residential conversion.

Randy Salvatore

Randy Salvatore, of Stamford-based developer RMS Cos., recently converted roughly half the rooms on the top floors of the Hartford Hilton hotel on Trumbull Street into apartments. The building’s bottom floors are now home to a DoubleTree by Hilton Hartford hotel, which has 170 guest rooms.

The former Hilton hotel, which struggled financially for years, especially during the pandemic, had 393 guest rooms and was in need of an upgrade.

Large-scale and aging traditional hotels “were built for different times,” Salvatore said, prompting developers to find creative ways to repurpose the spaces.

Higher construction costs and interest rates have made those conversions more difficult over the last year or so, but Salvatore said the market is shifting away from larger hotels with vast banquet halls in favor of smaller, boutique-style hotels with higher-end finishes and more modern amenities.

Larger hotels built in the 1970s and 1980s require a lot of capital to operate, Salvatore said, and can cost “tens of millions to just update.” It’s more economical to update smaller properties, he said.

In addition to being an apartment developer, RMS operates several boutique hotels, including the Blake in New Haven; the Lloyd in Stamford; the Goodwin in Hartford; Hotel Zero Degrees in Danbury; and the Watershed in Norwalk.

RMS, Salvatore said, is planning a multimillion-dollar renovation to the Goodwin Hotel, located in downtown Hartford, that should begin within a year. It will mostly involve cosmetic and redecorating work, he said.

Most hotels are refreshed or remodeled about every seven years, experts said.

Recovery trajectory

The hotel and hospitality industry has gradually recovered from the pandemic. The statewide hotel occupancy rate in pre-COVID 2019 was 61.2%, but plummeted to 37.7% in 2020, according to CoStar. The occupancy rate has climbed back since then, reaching 59.9% in 2023.

Meantime, revenues Connecticut hotels generate per available room — another key financial metric — are exceeding pre-pandemic levels, reaching $86.36 in 2023, up 6.8% from a year earlier and 18.5% from 2019, according to CoStar.

For the Hartford market, hotel occupancies reached 62.2% last year compared to 62.8% in 2019, while revenues per available room have more than fully recovered to $81.98 in 2023 vs. $72 in 2019, CoStar data shows.

Robert Murdock

Leisure travel is contributing to the boost in hospitality figures, said Robert Murdock, president of the Connecticut Convention and Sports Bureau, also known as CTMeetings.

The state-funded bureau was established to help recruit meetings, events and trade shows to Connecticut.

Murdock said sports tourism is a major driver for the state’s hospitality industry. This year marked the return of USA Gymnastics to the XL Center, an event that was canceled during the pandemic. Murdock said he hopes it becomes a regular biennial event for Hartford.

Connecticut will also host Premier Lacrosse League matches at Fairfield University, and the USA BMX New England Nationals in Trumbull, both scheduled for July.

Murdock said Hartford has a shortage of hotel rooms when major events occur at large venues like the XL and Connecticut Convention centers, Rentschler Field or Dunkin’ Park.

Inquiries to the bureau for meetings and events venues, with or without lodging, are up to their highest levels in 11 years, he said.

The bureau reported 684 inquiries in the 2022-23 season, up from 255 inquiries in 2020-21, Murdock said. The bureau has received 611

611 inquiries for meetings and events venues during the 2023-24 season, which ends June 30.

People have had a strong desire to meet in person since the pandemic ended, Murdock said, noting that business travel and lodging have recovered more slowly.

Corporate meetings are returning, but “they’re going to smaller properties, they’re higher-end corporate events, looking for luxury boutique properties,” like the Goodwin in Hartford or Delamar in West Hartford, he said.

Kozlowski said hotels in the state used to serve 60% business clients and 40% leisure/tourism guests. “Now it’s flipped, and leisure is more dominant.”

Murdock said with some hotels being converted to housing and new builds trending toward the smaller side, there is less inventory in the market, driving up demand for the remaining rooms.

Already, the East Haven Home2 Suites has seen about 70% occupancy since opening, Desai said.

Reinventing hotels

Chris Chiappa, vice president of acquisitions and development for the Connecticut-based Waterford Hotel Group, said hotels are staying relevant post pandemic by finding new opportunities.

Chiappa recently participated in a panel discussion during the recent Connecticut Commercial Real Estate Conference in West Hartford, hosted by the Greater Hartford Association of Realtors.

His company manages 30 properties and over 3,700 rooms in nine states.

Some hotels, Chiappa said, are reinventing themselves, offering two hotel brands under one roof — one focused on extended stay, and the other focused on guests for staying one or two nights.

Partial conversions to apartments can give hotel owners much-needed capital to renovate and refresh their brand, attracting guests who want a more modern and upscale experience, he said.

“I think you're going to continue to see more of those hybrid redevelopments,” Chiappa said.

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