Hotels go dark as Michigan's hospitality industry is 'decimated'
Detroit — The coronavirus crisis has sent the hotel industry in Detroit and the rest of Michigan into a downward spiral, and it's uncertain when it may rebound.
High-end hotels that are symbolic of the downtown's rebirth — the Westin Book Cadillac, the Foundation Hotel and the Shinola Hotel — have locked their doors temporarily to visitors. Meetings and conventions that would infused $151 million into the city were canceled for the five-week window through April 15, according to the Detroit Metro and Convention and Visitors Bureau. A quarter to a third of the hotels and restaurants in the state will never reopen, the Michigan Lodging and Restaurant Association estimates.
"The industry is in the process of being completely decimated," said Justin Winslow, president and CEO of that hospitality trade group. "I don’t think that’s a total surprise when you consider travel has grinded to a halt."
Jeff Katofsky, majority owner of the recently reopened St. Clair Inn near the Blue Water Bridge and the Delta Hotel at the Detroit Metro Airport, says he'll have apply to for small business loans to keep things operating. The historic St. Clair Inn kitchen remains open for curbside service, but the resort hotel side of the business is closed. About 100 events are booked there through the next 18 months. And while the Delta Hotel remains open, occupancy is off by 60%. He's had to lay off more than 200 at both hotels and cut his pay to keep employees paid.
"We’ve never seen anything like this period," Katofsky said. "You’ve got to go back to the bubonic plague. We put the whole country into an induced coma over this. Really the whole world."
Hotels are allowed to stay open in a limited capacity to provide shelter under Gov. Gretchen Whitmer's stay-at-home order effective through April 13, but many have closed their doors because of widespread vacancies and to protect employees
The list of closed hotels in the tri-county region of Detroit was at 17 when the Convention and Visitors Bureau took a tally a couple of weeks back, but that likely has grown.
The Detroit Foundation Hotel, located in former firehouse across the street from the TCF Center, temporarily laid off 164 employees as of March 22, according to a filing with the state. The boutique hotel "suspended operations to protect the health and wellbeing of our employees," Phil Salud, general manager of the Detroit Foundation, said in a statement to The Detroit News.
The hotel is continuing to pay the employees’ portion of their benefit premiums for medical, dental and health through June 30, and it's giving employees the option of “cashing out” any earned vacation time, Salud said.
Hotels, already reeling with lost business over the last month, will not have a pick-me-up come June when the North American International Auto Show at the TCF Center was scheduled. The auto show was called off Saturday, and the convention center already is being transformed into a field hospital for coronavirus patients.
The lights remain on at some downtown hotels. Detroit's Hilton Garden Inn and Holiday Inn Express are open. Trumbull and Porter in Corktown also remains open.
"We have contracts with businesses that are essential, and if we displace them that would cost the businesses a lot of money," Trumbull and Porter General Manager Jeremy Howe said. "We had some of these companies reach out to us in a panic that we were closing, and we luckily put them at ease."
Even so, business has drastically declined with capacity on average at 10% at the boutique inn.
"I can't think of any other business, maybe airlines, that has been hit harder than hotels right now," Howe said. "We are hoping for a quick recovery. I worked in this industry through the financial crisis and 9/11, and this is obviously the worst thing that we’ve seen."
Realizing how shaken businesses are by this pandemic, the Michigan Lodging and Restaurant Association is asking the state to earmark tourism funds as relief for them.
Specifically, they want the state to create a Hospitality Emergency Grant Program with Pure Michigan tourism dollars. The state of Illinois has created a grant program with $14 million in funds originally budgeted for job training, tourism promotion and other purposes. Some Illinois hotels are eligible to receive up to $50,000.
But Gov. Whitmer on Monday gutted $16 million for the Pure Michigan tourism campaign to help support the state's response to COVID-19.
Winslow, the trade association's chief, says Whitmer "made the right decision reallocating anything that is immediate and needed for what's right in front of us, but we would say what is right in front of us is an industry that's collapsing, so urging and finding a way to reallocate those resources to the hospitality emergency grant program is something we are very much interested in."
The association said it is continuing to talk with members of the legislature and the governor's office on establishing a grant program.
To help small businesses weather COVID-19's effects, the Michigan Economic Development Corp. has a Michigan Small Business Relief Program that provides up to $20 million in grants and loans. The U.S. Small Business Administration is also offering low-interest federal disaster loans for working capital for Michigan small businesses hit with substantial economic injury from the virus.
The uncertainty surrounding how long the virus' spread will continue keeping people inside and avoiding travel. That concerns hoteliers and experts because they don't know when to expect a recovery. Alan Silver, a member of the Meister Economic Consulting team and former Ohio University professor of hospitality, says hotels just don't stand a chance in a time where people are being advised to stay home.
"It’s going to impact hospitality and tourism for a long time," he said. "I can’t tell you how long. It’s frightening for people to think about travel, period. The whole industry is so devastated, and it’s going to be devastated for quite some time — and even when it comes back it will come back slowly."
Larry Alexander, the president and CEO Detroit Metro Convention and Visitors Bureau, has been in the hospitality business for 50 years. Nothing he's been through —the Great Recession and 9/11 attacks included — compare to what he's seeing now with the pandemic. The bureau will continue to try to bring business back to the city.
"We are trying to hang on to everything we got, plus see what more we can bring in," he said. "And then of course you add to that the lack of sporting events played in our downtown core, lack of concerts, restaurants being closed. Our industry is being devastated by this virus."
In addition to the auto show cancellation, Alcoholics Anonymous canceled a July international convention in Detroit. The organization would have brought in about 50,000 visitors to the area and used more than 100 hotels, Alexander said.
"I think we all know that we are going to get through this," Alexander said. "It’s just a matter of how long this will take."