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'It’s really catastrophic': Pandemic sends hotel industry into free-fall

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Madison area hotel industry struggles amid COVID-19

The HotelRed, located across the street from the UW Field House and Camp Randall Stadium, would typically be busy during next weekend's home Badgers game, but has been closed since March. Phillip Mattsson-Boze is the hotel’s general manager.

The outdoor plaza overlooking Lake Mendota at The Edgewater hotel would have been a sea of cardinal and white this Friday.

A few blocks away, at the Concourse Hotel, each of its 373 rooms would be booked. Restaurants and retailers on nearby State Street would be jammed and there would be anticipation by hotel guests of a Saturday morning counterclockwise stroll around Capitol Square at the Dane County Farmers Market.

At the corner of Regent and Monroe streets, HotelRed would be sold out with some guests taking in the festive scene from their balconies. Lines for Mickies Dairy Bar would stretch down the block to Oakland Avenue, beer gardens on Regent Street would be packed and the UW Marching Band would be firing up a crowd at Union South.

Madison area hotel industry struggles amid COVID-19

Amy Wasney, a front-desk agent at the Concourse Hotel, has had little business since March. Bookings at the hotel are down over 70% and the staff has been reduced from 260 to about 40 people.

Except in this year of COVID-19, Madison and the dozens of hotels throughout Dane County will be eerily quiet when the Wisconsin Badgers football team opens its delayed and shortened season against the University of Illinois without 80,000 fans crowding into Camp Randall Stadium.

“It won’t be the same,” said Stephen Zanoni, general manager at the Concourse, Dane County’s largest hotel. “We’re doing everything we can to save money and trying to capture as much business as we can but obviously we’re in a very difficult financial situation.”

Madison area hotel industry struggles amid COVID-19

The plaza at The Edgewater, shown here in 2016, is a popular gathering space before Wisconsin Badgers football games, but will be largely empty on Friday when the Badgers open their season against Illinois.

The Concourse, typically staffed with 250 to 260 employees, now has only 30 to 40 on hand. Rooms that would go for $500 or more at The Edgewater are available this weekend for between $150 and $250 per night. HotelRed has been closed since March 17, its 55 employees furloughed. The now 48-room hotel doesn’t expect to reopen until fall 2021 until a major expansion project that adds 40 rooms, three floors and a rooftop bar is completed.

“I never envisioned locking down a hotel in my career but it was the right thing to do,” said Phillip Mattsson-Boze, the hotel’s general manager and president of the Greater Madison Hotel & Lodging Association. “A lot of the industry projections say that it’s going to be a while for our industry to bounce back. And a while being not a matter of months but a matter of years.”

Lodging among hardest hit

The pandemic has challenged many industries, and lodging has been among those hardest hit. Weekday bookings have dried up as conferences, conventions and business travel have largely been put on hold. Weekend stays also have tanked with the cancellation or postponement of festivals, fairs, concerts, weddings, sporting events and other activities.

As a whole, intercollegiate athletics at UW-Madison produce an annual economic impact of $610 million for the state, including $395 million in Madison, according to a study completed last year. Each Badgers home football game contributes $16 million to the state’s economy, but the vast majority of that money won’t materialize this season due to a lack of fans.

Madison area hotel industry struggles amid COVID-19

Adam Gautreaux, general manager of the Sheraton Hotel along John Nolen Drive, shows off some of its new meeting space following a $15 million, two-year renovation. Hotels that rely on business travel, conventions, conferences and weddings have been hit hard by the pandemic.

Hotel operators in Madison say business is down anywhere from 60% to 80% compared to 2019 and many are already bracing for a difficult 2021 as the virus continues to surge. It’s unclear how many properties around the state will survive past the distribution of a vaccine if federal aid, which continues to be debated in Washington, D.C., isn’t realized.

A survey conducted last month by the Wisconsin Hotel & Lodging Association showed 47% of lodging facilities in the state could close within a year without loans or grants. More than 50% of the state’s 200,000 lodging property employees remain furloughed or laid off.

“The COVID-19 pandemic is the single greatest crisis the hotel and lodging industry has ever faced, and the situation remains dire,” said Bill Elliott, president of the Hotel & Lodging Association. “We need to see some true leadership out of Madison and at the federal level if the hotel and lodging industry is going to weather this storm.”

Madison area hotel industry struggles amid COVID-19

The new outdoor space at the Sheraton Hotel on John Nolen Drive.

Last week, a coalition of 88 lodging executives from around the country pleaded with President Donald Trump to amend and expand the “restrictive” terms of the $600 billion federal Main Street Lending Program. Lodging officials say the terms prevent many businesses from accessing the funds.

“This health and economic crisis has wreaked havoc on hotels in our industry,” the executives wrote to the president on Thursday. “Your engagement is desperately needed to support struggling businesses, stem the impending wave of foreclosures, and save millions of jobs to ensure the health of the entire American economy.”

Madison area hotel industry struggles amid COVID-19

The hotels in the Madison area thrive on conferences, conventions, special events and Badgers football, but COVID-19 has killed most events. The Sheraton Hotel recently completed a $15 million renovation, has hosted only one wedding since March and has seen bookings plunge.

Earlier this month, Gov. Tony Evers announced $50 million in investments to small businesses in the form of $5,000 grants. The package included another $10 million for privately owned movie theaters; $25 million for live concert and live theater venues; and $20 million for the state’s lodging industry that in 2019 generated $3.7 billion in revenue.

But with hundreds of hotels, motels and other lodging properties around the state reeling, the $20 million in aid will go quickly.

“We’re going into next year and looking at nine to 12 months of limited service and opportunity. I don’t think a lot of businesses are going to survive it,” said Amy Supple, chief operations officer for the 202-room Edgewater, which in 2014 completed a $100 million expansion and renovation. “I’m really concerned about what Madison looks like as a destination. It could be years before it recovers.”

Madison area hotel industry struggles amid COVID-19

Every inch of the former Crowne Plaza is getting a remake as the property along East Washington Avenue is converted to a DoubleTree by Hilton. The hotel was purchased out of foreclosure in March by Middleton-based North Central Group.

Tourism in Dane County, with its lakes, UW-Madison, state government, Alliant Energy Center, Monona Terrace, museums, theaters, shopping opportunities, WIAA state tournaments and scores of special events, had a $2.3 billion economic impact in 2019, ranking it behind only Milwaukee County’s $3.8 billion in tourism spending. But this year, the economic impact will be reduced to shockingly low numbers.

Madison area hotel industry struggled amid COVID-19

Friends and family members of Michelle Wolf, of Epworth, Iowa, use a tarp to keep Wolf's Ayrshire Spring yearling dry and show-ready for the 2019 World Dairy Expo. This year's event, which was supposed to draw 50,000 people to Madison, was canceled.

The city of Madison in 2019 collected $18.9 million in room tax revenue but in the second quarter of 2020, room tax collections were $705,385, down from $4.4 million in the second quarter of 2019, a reduction of 85%, according to figures from David Schmiedicke, the city’s finance director. Schmiedicke estimates total room tax collections for 2020 could be in the neighborhood of $8 million.

Madison area hotel industry struggles amid COVID-19

North Central Group, a Middleton hotel company, has been renovating the former Crowne Plaza on East Washington Avenue into a DoubleTree by Hilton. The hotel is scheduled to open next month and is getting a complete makeover.

Deb Archer, who will retire at the end of the year as president and CEO of Destination Madison, said leisure travel is accounting for most of the bookings at area hotels, but properties in Downtown Madison are feeling the effects of the pandemic the most because they rely more on business travel.

“Uncertainty is very difficult and consumer confidence is waning,” Archer said. “It’s a pretty daunting picture right now. It’s really catastrophic.”

No events, no weddings

The losses can be seen out the front door of the 239-room Sheraton Hotel that last month completed a $15 million renovation and overlooks the Alliant Energy Center. Instead of hosting 50,000 people for World Dairy Expo this month, the majority of the traffic at Alliant has been from motorists queuing up for COVID-19 tests.

The Sheraton’s two-year project has added more event space, but a wedding reception hasn’t been held on the property since March. There’s a new bar and restaurant, outdoor patio, larger fitness center and the 1,200-square-foot Roth Room, a lounge on the hotel’s seventh floor for employees and visitors to Epic Systems in Verona. It’s named after David Lee Roth, the former lead singer of Van Halen, a rock group that trashed the hotel during a three-night stay in 1978.

Madison area hotel industry struggles amid COVID-19

Adam Gautreaux shows off the Roth Room on the seventh floor of the Sheraton Hotel in Madison. The room is named after former Van Halen frontman David Lee Roth. The band trashed rooms in the hotel during a 1978 tour stop in Madison.

But bookings at the Sheraton are down nearly 70% compared to 2019, although some guests have re-booked for 2021 after canceling reservations amid the pandemic.

“It’s been quite the challenge, to say the least,” said Adam Gautreaux, the Sheraton’s general manager. “We’ve truly tried to cut back from an expense standpoint where we were able to. We’re trying to weather the storm and make sure we can maintain the business we can capture and try and get through this.”

The success of Dane County’s tourism efforts over the past 20 years has resulted in a boom of hotel development and redevelopment projects, but some plans have been put on pause or changed.

Work on a 199-room Drury Plaza Hotel at the former home of Madison Area Technical College’s Downtown campus, 211 N. Carroll St., stopped months ago, and no work has begun on a proposed $43 million, boutique hotel in the 100 block of State Street.

Madison area hotel industry struggles amid COVID-19

Construction of the 199-room Drury Plaza Hotel on the former Madison Area Technical College campus in Madison's downtown has been paused. It's unclear when construction will resume.

At Madison Yards, a 21-acre mixed-use development just west of Hilldale, plans for a 175-room hotel have been replaced with a 15-story, 270-unit apartment building, according to documents submitted last month by Summit Smith Development.

The latest additions to the Madison-area hotel market include the 85-room Hotel of the Arts Baymont Inn & Suites in Fitchburg and the massive renovation of what had been the Crowne Plaza on East Washington Avenue near East Towne into a DoubleTree by Hilton. Both are scheduled to open next month.

The Crowne Plaza was purchased out of foreclosure in March by Middleton-based North Central Group, which has 26 hotels around the country including 11 in Wisconsin. In 2019, NCG opened the Home2Suites by Hilton and Liberty Station American Tavern & Smokehouse at the Beltline and Rimrock Road and will soon break ground on a Starbucks on the site.

Madison area hotel industry struggles amid COVID-19

The former Crowne Plaza has been undergoing a massive transformation into a DoubleTree by Hilton and is scheduled to open next month. Area hotels are struggling during COVID-19.

The DoubleTree project includes renovating nearly every inch of the 226-room hotel that opened in 1987 and includes nearly 10,000 square feet of meeting space. Jeff Lenz, president and chief development officer for NCG, which also owns the AC Hotel at Webster Street and East Washington Avenue, said the project comes at a time of economic uncertainty but is an investment to the future. NCG has laid off about half of its staff while revenues are down nearly 60% across the company’s properties.

“It’s certainly not fun,” Lenz said. “But our discipline in how we set aside reserves for all of our properties … it’s a huge component in helping us through this. And that’s what we’re leaning on right now. We’re projected to kind of get through the end of next year and that’s what we’re programming to do because we think we can get to the other side of the vaccine and the recovery by then.”


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