H&LA’s David Sangree got the chance to weigh in with Cleveland.com on an article about new downtown Cleveland hotel projects and what these projects mean for the future of the Cleveland hospitality market post-pandemic.
Published by: Susan Glaser/Cleveland.com
Published date: October 2021
It’s too early to celebrate the end of the pandemic’s effect on Cleveland’s hospitality industry. But there is some reason for optimism.
After more than 18 months of pandemic-induced paralysis, the hotel development pipeline is showing some signs of life, with a new hotel slated for one downtown building, a major renovation planned for another, and more in the works.
In recent weeks, several dramatic downtown hotel projects have been revealed, after a long period of dormancy:
* Owners of the Tower at Erieview announced plans to turn the lower floors of the 40-story skyscraper into a luxury W Hotel, with 210 rooms. It would be the brand’s first hotel in Ohio.
* Owners of the Renaissance Cleveland Hotel shared plans for a $62-million renovation of the historic beauty, which would also include rebranding the property that fronts Public Square. Consultant Stephen Goodman, working for Toronto-based Skyline Investments, told city officials last month that the property was going to be rebranded as part of the Marriott’s upscale Autograph Collection, and would revert back to its historic name, Hotel Cleveland, or simply “The Cleveland.” In addition to remodeling the lobby, meeting spaces and 491 guestrooms, plans call for the addition of a retro “Hotel Cleveland” sign atop the building, built in 1918.
* And several prospective owners have submitted bids to buy the Westin Cleveland Downtown, one of the city’s main convention-oriented hotels, which is facing a foreclosure action following months of unpaid bills. Among the possible new owners is Connecticut-based HEI Hotels & Resorts, which owns numerous upscale properties across the U.S., including the Westin Cincinnati.
“I think there is cause for optimism,” said David Sangree, president of Hotel & Leisure Advisors, a Cleveland consulting firm. “Developers are looking past the pandemic – they’re not afraid of it anymore.”
The historic Renaissance Cleveland Hotel will be renovated and rebranded, with a new name, Hotel Cleveland.Lobby at the historic Renaissance Cleveland Hotel, which will be renovated and rebranded.
The hotel industry, particularly in big-city downtowns, has been devastated by the pandemic-induced economic downturn, with occupancy dropping into the single digits early in the health crisis.
And while it may be too early to say that the hard times are over, it’s almost certainly true that the worst times are in the past.
Hotel occupancy in downtown Cleveland in August was 62.7%, according to STR, a hospitality data firm. That’s the highest it’s been in nearly two years, since November 2019.
Matthew Watson, general manager at downtown’s Metropolitan at The 9 hotel, said weekends over the summer were as busy as they were pre-COVID. It’s the weekdays that are lagging. “My opinion is that it’s all dependent on the news regarding variants, surges and such,” he said. “Once the coast is clear, business travel will return.”
As for the extra competition entering the market in the coming years, Watson said, “There’s going to be the ongoing debate regarding additional supply in the market, but as we saw with the last expansion in 2016, the demand seems to grow to meet the supply.”
Indeed, hotel occupancy in the Cleveland region dipped briefly after the 600-room Hilton Cleveland Downtown and other properties opened prior to the Republican National Convention in 2016, but has increased in more recent years (before the pandemic, at least).
Laurel Keller, senior vice president at Newmark Valuation & Advisory, said Cleveland’s hotels seem to be recovering faster than many of their Midwest peers, at least as measured by one key industry metric, revenue per available room (or RevPAR, which is calculated by dividing hotel revenue by total number of rooms). According to Keller’s analysis, Cleveland’s recovery has been speedier than markets in Columbus, Cincinnati, Indianapolis, Chicago, Detroit, Milwaukee and Minneapolis.
“As with any downtown market, the recovery will take longer than suburban markets,” she said, adding, “Interest from developers looking to enter a market is typically seen as a positive economic indicator.”
The path to full recovery, however, isn’t likely to be straight line. Among the anticipated obstacles: The ongoing effect of the delta variant on travel decisions, and business travel’s increasingly slow rebound.
The biggest hotels downtown, including the Westin, the Hilton Cleveland Downtown, the Renaissance and others, rely heavily on group travel business from the Huntington Convention Center and other venues, as well as corporate business travelers. Both groups have been slow to return.
Ron King, the general manager at the Huntington Convention Center of Cleveland, has had to scale back his optimism from earlier this year about the return of group business.
He now doesn’t expect the convention center to return to pre-pandemic levels until 2024. “This pandemic just continues to churn on,” he said. “I was a lot more optimistic earlier.”
Despite ongoing uncertainty, the investments that hotel companies are willing to make in Cleveland suggest that they believe better times are ahead. It also helps that many of the investments made today won’t be fully realized until 2024 or beyond.
In addition to the recent headline-grabbing developments concerning the W Hotel, the Renaissance and the Westin, there are a numerous other, smaller projects that industry observers are keeping an eye on. Among them:
* The Orbit, a 54-room Wyndham Trademark hotel under construction across from Cleveland Hopkins International Airport, in a former NASA Glenn Research Center building. It is expected to open in mid-December.
* A 130-room hotel included in plans for the Bridgeworks development at the west end of the Detroit-Superior Bridge at the corner of Detroit Avenue and West 25th Street in Ohio City.
* And yet-to-be-revealed plans for the Baker Building, on East 6th Street near Euclid Avenue. The new owners of the 11-story building were awarded a $2 million state historic tax credit late last year to assist with a $23 million plan to turn the building into a boutique hotel.
Other projects, including the proposed splashy conversion of the historic Masonic Temple at Euclid Avenue and E. 36th Street into a Dream Hotel, have been delayed. Originally expected to debut in 2022, the Dream Cleveland is now listed on the company’s website as opening in 2024.
Sangree cautions that not all projects will move forward, which is the case even during times of less economic uncertainty. “We’ll wait to see what gets financing and what gets constructed,” he said.
Still, he said, all this conversation, after months of silence, is cause for optimism. He also noted that his consulting business is very busy, another sign that developers are serious.
“Investors and hotel developers are seeing a light at the end of the tunnel,” said Sangree. “They’re willing to put some money in and not just wait