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Under pressure, hotel operators cut staff, consider closing

The pressure on area hotels is building by the day, as lost revenue forces more operators to lay off staff, or even contemplate more drastic steps like temporary closures or at least consolidating business from multiple locations.

Hotels are reporting that occupancy is down more than 80% across the board. Corporate travel is largely cut off. Meetings and conferences have been canceled everywhere. Leisure travel has plunged amid increasingly strong government pleas to stay put because of concerns about coronavirus.

As a result, hotel owners are getting worried about their bottom lines – with fixed expenses but little or no money coming in. Already, the Buffalo Grand Hotel is closing temporarily – the biggest victim so far.

But the crisis is spreading, and even the giant global hotel corporations are starting to warn about their own viability, pleading for help from the federal government.

"They're likely to be insolvent as well," said Rum Chopra of C/N Group, which has owned the Wyndham Garden Buffalo Downtown hotel since 1998. "They're dependent on hotels like ours to generate their income, through fees."

The Wyndham, a 100-room hotel on the Buffalo Niagara Medical Campus, remains open, but Chopra estimated it has only 16 to 18 people staying there.

As a result, Chopra said, it has gone to a skeleton crew, after temporarily laying off about 55 employees. The hotel also reduced its food and beverage options.

"We had to let a lot of people go, hopefully just until we get through this," he said.

"Every hotel is in the same situation. Business dried up literally overnight," Chopra said. "It’s unsustainable for any length of time."

Even so, Chopra said the hotel is "trying to give as many people hours as possible" to keep them on staff until conditions improve.

"It’s very devastating for people who need their paychecks," he said.

Hotels typically are able to forecast revenue, but "right now, our historical models are worthless," said David Hart, president and CEO of Hart Hotels.

"We’re more or less flying by the seat of our pants," Hart said. "We think we’re doing the right thing, but we’re prepared to adjust if we’re told to or we see the approach that we’re taking is misguided."

His family-owned company is trying to keep their operations open, he said.

"If you close, you don't wipe out your operating losses to zero," Hart said.

"We're making schedule changes to staff, and unfortunately some furloughs, and attempting to cut as much operating costs as we can," he said. "Although it may cost us a little bit more money than closing, we just think it’ll be more beneficial for the long term to try to ride it out, as opposed to shutting down for a period of time that is a mystery to everybody."

That includes dividing his management staff to cover 24-hour shifts as needed for his three local branded hotels in Erie County – the Holiday Inn Express at the airport and the Candlewood Suites and Doubletree Hotel in Amherst – as well as four Harbor Hotel resorts across the state and in Maine, and an independent hotel in Ithaca.

"Right now, as long as we are legally allowed to say open, that’s what we’re attempting to do," Hart said. "We're trying to take it literally hour by hour and trying to do the best that we can."

The Buffalo HarborCenter Marriott, atop the LECOM Harborcenter complex owned by Terry and Kim Pegula, remains open, but Lance Shaner, whose Shaner Hotels operates the facility for the Pegulas, said that could change, depending on the actions of the state.

“We’re kind of waiting on the governor’s final decisions,” Shaner said. “Until we get clear guidance on that, we’re just waiting for it.”

Among other companies, Benderson Development Co. – whose Buffalo Lodging Associates division owns and operates about 40 hotels – is "looking at options and doing financial analyses at the moment," said Buffalo Lodging President Ronald Kendall. "We have not made any decisions."

"I have hundreds of employees to talk to and think about before I finalize any decisions," he said. "Closing a hotel has its own set of costs, so we have to review each one and then determine how to move forward."

Ellicott Development Co., which operates hotels through its Ellicott Hospitality division, has "scaled back drastically" and laid off staff in its hotels and restaurants earlier this week, said CEO William Paladino, who warned that there may be more to come. However, the company has not closed any hotels yet.

"To close a hotel and open it back up is very difficult," he said. "It's not just turn off the lights and turn them back on."

The company had considered closing or consolidating business at some of its hotels, including the Fairfield Inn & Suites by Marriott Buffalo Amherst near University at Buffalo's North Campus, as well as the Hampton Inn, Staybridge Suites and Country Inn in West Seneca, which are located near each other.

"Right now we're saying no, because we think we have an option for them," Paladino said.

He suggested that Friday's forecasted windstorm could "help bring some additional utility business," although that's not guaranteed. Ellicott also may close some floors of the hotels and minimize occupancy, without completing shutting the doors.

Glen A. White, a spokesman for Delaware North Cos., which owns and operates the Westin Buffalo Hotel in its headquarters building at 250 Delaware Ave., said the luxury hotel remains open, despite "a significant drop-off in business." Its primary restaurant, Patina 250, is closed but doing catering, while Jake's Cafe is open for takeout, in accordance with state mandates.

"We're continuing to take appropriate measures to help ensure guest and employee safety based on CDC and state guidance," White said.

But even if the operators chose to close, there are also other legal and administrative hurdles to doing so, particularly the franchise agreements with the national brands, which restrict them from closing. Independent brands don't have that issue.

Hart said hotel companies "have softened that stance," closing some of their corporate-owned hotels and allowing franchises to close – but only after obtaining approval, which takes time. "You can’t just walk in and say you’re closed," he said.

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