Twin Cities hotel workers and owners uncomfortable with uncertain future

Baheru Haile is a veteran of the idled hotel industry.

Haile, 61, has worked just about every job over the past 20 years at Sheraton-branded hotels, including night auditor, front desk and shuttle driver. He isn't optimistic about returning to work soon.

"I want to work and I like hospitality," said Haile, who emigrated from Ethiopia in 1979 and earned degrees in international relations and economics at the University of Minnesota. "I enjoy talking with people who I see year after year, while driving the shuttle. I have made many friends."

Haile and other employees at the former Sheraton Midtown Hotel, near the Allina Health headquarters in south Minneapolis, were laid off in February when a new owner took over the hotel. In March, the employees were told to clean out their lockers and that they would have to apply for their old jobs. Haile did. And he's heard nothing.

Jay Patel, a local hotel operator, acquired the hotel in February for $8 million from a Qatar-based investment group that had paid about $10 million in 2016, according to Hennepin County records. The deal closed just before the coronavirus outbreak disrupted travel and lodging.

Patel briefly arranged for the former Sheraton Midtown to house homeless people after the protests over the May 25 killing of George Floyd in Minneapolis. But he ended the arrangement in June after a drug overdose and the trashing of the hotel.

Haile spent some of his free time working with his kids on school in the spring, and volunteering with his YMCA and an agency that settles immigrants. He has a mortgage and other expenses that won't be covered by state unemployment benefits. The $600 weekly federal stimulus payments to idled workers expire this month.

"I have good work experience," said the married father of two. "I'm looking for work."

And his search will transcend the hard-hit hospitality business.

With business travel waylaid, conventions canceled and professional sports postponed, Twin Cities hotel occupancy has fallen from about 70% last summer to about 10% this summer, Tanya Pierson, managing director of hotel consulting firm HVS told the Star Tribune earlier this month. Hotels are bleeding money.

At least one big hotel operator has been pushing the administration of Gov. Tim Walz — without success so far — to allow hotels to expand meeting occupancy from 25% to 50%.

Doug Greene is managing director of Florida-based Haberhill, which owns several hotels including the downtown Hyatt Regency and Hilton, which are the biggest in the Twin Cities with nearly 1,500 rooms in aggregate. About 800 of the 850 workers who make base wages of $13 to $16 an hour are idled, said Greene. The company has helped with health benefits, gift cards and helping file for government benefits.

Greene said Haberhill's Marriott St. Louis Grand downtown flagship is proving that well-run hotels can safely host meetings of up to 50% of capacity using protocols also practiced by Hyatt, Hilton and other major hotels.

"Your governor doesn't understand what Hilton, Hyatt and Marriott are doing," Greene said. "We can space. We're not doing buffets. We're constantly cleaning. The meeting planners understand."

Steve Grove, Minnesota commissioner of employment and economic development, told Greene in late June that the Walz administration wouldn't budge in July from hotel restrictions on meeting rooms beyond 25% capacity and 250 people in the room.

"I'm frustrated," Greene said. "We've got groups in the fall that may start canceling."

The Hyatt Regency had 3.7% occupancy in June and $78,000 in revenue, Greene said. Last June, it was 85% occupied and grossed $5.5 million. The Hilton dropped to $176,000 in revenue last month from $5.8 million a year ago.

More months like this spell a significant 2020 loss for two hotels that have generated positive annual cash flow of about $30 million on an investment of $300 million-plus by the Haberhill partners and their lenders.

A spokesman for Grove said that despite meetings with Greene and other hospitality executives, state leaders have yet to decide on when to move to the next phase of opening the Minnesota economy that would allow for increased capacities.

Walz has taken a cautious approach in light of spikes in coronavirus in Texas, Florida and Arizona. Those states were in the vanguard of opening businesses more fully in recent months.

Jim Graves, the Minneapolis-based hotel owner and manager, doesn't like draining money or idling employees.

"But the science and virus dictate," he said. "I think most people want to play it safe. I don't think Walz or anybody can turn the clock back. Our occupancy is ticking up a bit. There's more corporate travel, particularly medical-related travel.

"Our airport hotel occupancy is around 30%. But our downtown properties are fighting to maintain 10%. There's no Twins or Guthrie or Orchestra Hall. Little vacation travel. Nothing is going on downtown. The earliest we're coming back may be the first quarter of 2021. And that depends on a vaccination."

Neal St. Anthony has been a Star Tribune business columnist and reporter since 1984. He can be contacted at nstanthony@startribune.com.