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March 6, 2023 Deal Watch

Improving CT hospitality market kick-starts new hotel development

HBJ PHOTO | MICHAEL PUFFER Bristol Events Center Sales Manager Art Durbano holds a rendering as he stands in what will shortly be a convention center ballroom attached to a new hotel.
CT hotels in the planning or construction process
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The Hartford Hotel & Conference Center in East Hartford fell on hard times before its 2020 closure, with frequent visits by police and one online reviewer advising “avoid it like the plague.”

“It became very quickly a run-down property,” East Hartford Mayor Mike Walsh recalled. “You could rent the rooms by the hour, which was unfortunate.”

The blighted and boarded Roberts Street property will soon have a new life and look under a new owner. New Jersey-based Kautilya Group paid $3.4 million for the shuttered, 130-room hotel in August and is pursuing a multimillion-dollar renovation under two Marriott brands, along with an attached Starbucks.

“Once it’s done, it’s going to be a brand-new building,” said Kautilya Group Asset Manager Gaurang “Gary” Patel. “Everything is new.”

Patel’s investment and bullish outlook is buoyed by a resurgent hospitality industry that has seen occupancies in Connecticut bounce back to near pre-pandemic levels.

Average daily room charges have surged past 2019 rates, but that doesn’t necessarily mean windfall profits as hotel owners grapple with high inflation and a bruising labor shortage.

“The hospitality industry has come back very strong on the occupancy side and the (average daily rate) side,” Patel said. “We are currently building to before-pandemic (daily rates). It is going to continuously grow.”

Rebounding occupancy

The onset of the COVID-19 pandemic drove Connecticut hospitality occupancy rates into the ground: from 61.5% in 2019 to 37.8% in 2020, according to global hospitality data and analytics company STR.

Occupancy rebounded to 53.1% in 2021 and hit 59.6% in 2022.

Average daily rates for Connecticut hotels — which stood at $119.83 per night in 2019 — fell in the first year of the pandemic but have since rebounded to $136.77 per night.

Ginny Kozlowski, executive director of the Connecticut Lodging Association, said the industry is still not fully recovered from COVID’s impact, but there are positive signs. Pent-up demand and good weather, for instance, led to a boom in occupancy last summer.

Even so, Kozlowski said most of the New Haven-area hotel development projects scuttled amid the pandemic’s onset remain stalled, or have been abandoned outright. She said she also receives a steady stream of calls from developers seeking hotels available for conversion into apartments, a trend that has taken hold in Hartford and many other markets.

One new Elm City hotel that debuted recently was Bruce Becker’s conversion of the former Pirelli Building into the 165-room, eco-friendly Hotel Marcel.

The nature of hospitality in Connecticut is changing, Kozlowski noted.

Business travelers used to account for 60% of bookings with leisure travel accounting for most of the remainder, she said. That trend has reversed itself, Kozlowski said, with leisure visitors now accounting for more than 60% of bookings.

“So, there’s been this shift and it’s an ongoing shift,” Kozlowski said. “The question is, after all is said and done, what will the mix be here in Connecticut?”

Positive signs

Patel’s East Hartford hotel project is one of seven hospitality construction developments currently underway in Connecticut, according to STR.

Another 21 are in various stages of planning.

At the end of the third quarter nationally, there was a 10% spike in new hotel construction and a 6% increase in the number of rooms under development compared to the year-ago period, according to industry research group Lodging Econometrics.

Additionally, at the end of the third quarter, the number of hotel construction projects slated to launch nationally in the following 12 months was up 14%, Lodging Econometrics data shows.

Robert Murdock, president of the Connecticut Convention & Sports Bureau, said shoreside hotels had a banner year in 2022, but city hotels that rely on business travel are still struggling.

Another trend is the increasing popularity of extended-stay hotels, several of which are under construction.

“There definitely seems to be more discussion of hotels being built,” Murdock said. “It seems like the pace has picked up. It seems like we turned a corner because more things are happening. People seem to be more optimistic about the future and that is part of what is happening.”

In East Hartford, Patel plans to offer 80 extended-stay suites under the TownePlace Suites brand. Rooms offer kitchenettes, dishwashers and refrigerators for people planning stays of multiple days or weeks. Another 64 rooms will run under Marriott’s Fairfield Inn & Suites brand, geared toward short-term stays.

Patel said he hopes to finish renovations by August but acknowledges ongoing supply chain issues make an exact prediction difficult.

In nearby Bristol, Las Vegas dental implant entrepreneur Dr. Gerald Niznick is building a 90-suite hotel under Hilton’s extended-stay Home2 Suites brand right next to his 141-room DoubleTree by Hilton hotel. He is also building an attached 35,000-square-foot convention and events center.

“What triggered this whole process was extended-stay hotels were doing well in the area,” Niznick said. “Hilton came up with the Home2 brand, sort of an upscale extended-stay hotel. I wanted to get it before someone else took it.”

Niznick said his strategy is to go after weddings and conventions that will help fill his hotels and “provide a beautiful venue.”

“There isn’t anything like it in the area,” he said.

The Bristol convention center’s ballroom will feature modern audio and visual technology, along with breakout rooms. Slated to open with the Home2 hotel in July, the center will also host galas, fundraisers, corporate functions and events.

Lynn Dell, general manager of Niznick’s Bristol hotels, said the DoubleTree cut its staff of 120 to between 10 and 15 people at the start of the pandemic. All have since returned and 2022 was a better year financially than 2019, Dell said.

“In 2022 we had a strong year,” Dell said. “All trends right now seem to be that things are on an uptick, and we feel good about it.”

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