Debt Too Heavy For Crowne Plaza
If there’s any solace for operators of the Crowne Plaza in Worcester, it’s that tough times are not unusual in the hotel industry.
Lodgian, the owner of the downtown hotel and meeting facility, fell behind on its $16.3 million mortgage.
As a result, the hotel was transferred over to the lender, Wells Fargo Bank, and the court appointed a receiver to manage the property.
In an SEC filing, Lodgian said cash flow from the 243-room hotel “was not sufficient to service the debt on the property.”
But Lodgian is not alone in its financial woes. The hotel industry across the United States is facing debt pressure as vacancies rise and room rates fall. Even the high end inns are feeling the pain.
This summer the owners of the Four Seasons Hotel in San Francisco defaulted on $90 million in loans and were forced to renegotiate the debt payments.
Moving Forward
The Crowne Plaza is now being operated by Driftwood Hospitality Management, a North Palm Beach, Fla.-based company with a history in Worcester. Several members of the management team at Driftwood were once part of a company called Servico. That company purchased the Worcester hotel in 1995 and converted it to a Crowne Plaza from a Marriott. Several members of Servico Inc. left the company when it merged with Impac Hotel Group to form Lodgian in 1998.
Peter Walz, executive vice president of Driftwood, said Driftwood is happy to be back in Worcester and that customers should not be concerned about the hotel’s future in the city.
“Driftwood’s a very experienced management company, and we’ve always felt that the hotel and the community was a very good community to be part of,” he said. “We’re going to run the hotel and we’re going to serve the customers.”
Driftwood has brought in its own general manager named Steve Groppe to run the Crowne. He previously ran another Driftwood Crowne Plaza in Cleveland.
For hotels in and out of Worcester, there is definitely downward pressure on prices. According to statistics from STR, a research company that follows the hotel industry, the average room rate in Worcester was $106 per night, down 4.2 percent from 2008. Vacancy rates in the area are now about about 40 percent.
Revenue for Worcester hotels has similarly taken a dive this year. It totaled $19 million through October, according to STR, a drop of 6.5 percent from 2008.
Group Gatherings
Patrick Lynch, director of Destination Worcester, a quasi-public agency founded to draw convention business to the city, said he projects the city’s hotel business to be down 3 to 5 percent from 2008 to 2009.
That’s quite a bit better than the industry as a whole, which is expecting drops of between 15 and 20 percent this year, he said. “It’s not a great time to be in the travel industry,” he said.
As far as event business is concerned in the city, Lynch said one-day meetings are up, but multi-day meetings are down. That means less demand for the city’s 981 overnight rooms. Lynch said he had heard rumblings about the trouble at the Crowne Plaza, but was surprised when he heard about the receivership. However, he said he’s confident in the future for the property.
There are two big conventions come to the city next year, which could help bolster the local tourism trade. The USA Gymnastics is coming in March, and the Democratic and Republican state conventions will both be hosted in Worcester. The two political events are expected to fill more than 650 hotel rooms during their peak, according to Lynch.
Despite the uncertain times for the local hotel trade, the Beechwood Hotel, a boutique facility privately owned by Dr. Charles and Janet Birbara, is moving forward with a major expansion, which will include a 250-seat restaurant.
Mark Waxler, general manager at the Beechwood, said he hopes the upgraded restaurant will help lure people from east of Worcester to make the trip to the city. But, Waxler acknowledges the tough spot for many in the industry.
“The products that we buy are going up, but our rates are going down,” he said. In particular, he pointed to depressed rates in Boston — where rooms are available for as little as $99 a night — as putting added pressure on Worcester area facilities.
“When you have Boston dropping their prices, what does that tell you?” he said.
Waxler also predicted a much tougher corporate Christmas party season for hotels as well as restaurants. Companies that have laid off workers or cut pay are more likely to stay at the office than they are to book a room at an outside facility, he said.
“The Crowne is a sign of the times,” he said.
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