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Business Observer Friday, Oct. 9, 2020 1 week ago

A Zig to the Zag

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Aparium Hotel Group debuts Hotal Haya in Ybor City as COVID-19 decimates much of the hospitality industry nationwide.
by: Kevin McQuaid Commercial Real Estate Editor

Aparium Hotel Group prides itself on being different.

The Chicago-based company’s hotels intentionally don’t carry flags like Hilton or Marriott, they’re often in repurposed old buildings and target a hyper-local audience of both travelers and residents alike. Unique food and beverage operations, which many hotel chains eliminated decades ago, are a focal point.

But its opening late last month of the 178-room Hotel Haya in the Ybor City section of Tampa may be its biggest zig to the lodging industry’s zag yet.

At a time when the majority of hotels are shedding workers and whispering about closing permanently, Aparium has grand plans for Hotel Haya and a half-dozen other hospitality projects in the works in Virginia, Michigan, Colorado and elsewhere. To date, the nine-year-old company has opened eight hotels, in New Orleans, Detroit, Kansas City, Memphis and other cities.

Not that Aparium is ignorant of the uphill climb if faces from the COVID-19 pandemic, which has crippled the hospitality industry nationwide.

“Obviously it’s a big hit — we expect we’ll be 30, 40, maybe even 50% below 2019,” says Michael Kitchen, an Aparium partner. “And fortunately, our hotels are largely leisure driven and very top of market, which puts us in a better place for a rebound.

“But realistically, we’re looking at early 2022 before we’re back, assuming the trajectory we’re on now,” he adds.

Kitchen says Aparium and its partners — Tampa’s Capitano family, owner of Radiant Oil, and Blue Pearl Veterinary Hospital CEO Darryl Shaw — were roughly 90 days away from opening when the pandemic took hold, which made stopping work difficult.

“There would have been large cost implications for stopping work with our general contractor, our vendors, suppliers,” Kitchen says.

Together, the decision was made to proceed with the opening of the $53 million hotel, which includes a pair of in-house eateries, 7,000 square feet of meeting space, a swimming pool and fitness center.

Kitchen says the trio wanted to open well in advance of the NFL Super Bowl in Tampa in early 2021, to work out any kinks in the four-story Hotel Haya.

“This gives us a longer runway to show that we’re really a part of the community and to capture loyalty,” says Kitchen. “We’re hoping that COVID-19 is more a hiccup than a standstill.”

For many hotels, however, the pandemic is likely to be a hard stop.

Last month, a survey of 1,000 lodging properties by the American Hotel & Lodging Association (AH&LA) found that 75% plan to lay off more workers to stay afloat until the end of the year — even though nearly as many say they are operating with less staff than in February.

The industry trade group also found that 32% of those surveyed say they are contemplating bankruptcy; another 42% anticipate closing permanently within the next year.

Nationwide occupancy, meanwhile, has hovered around 48.6% for September, while revenue per available room (RevPAR) — a key industry metric — has slid to $46.54 per room. RevPAR is down by 51% from the same period in 2019, according to industry tracker STR.

If the slide continues, AH&LA warns that some 38,000 hotels in the U.S. could shutter permanently — 2,500 in Florida — and some 3.7 million jobs could be lost.

“It’s very tough timing to open a property,” says Kent Schwarz, an executive managing director at commercial real estate brokerage firm Colliers International, in Tampa, who specializes in the hospitality sector.

Consider that for Hotel Haya to make it into the black, it will need to book between 107 and 115 of its rooms nightly, based on industry standards to reach 60% to 65% occupancy.

In contrast, the full-service Hotel Haya realistically anticipates averaging about 25% for the balance of this year, with spikes on weekends and holidays, says Pablo Molinari, the hotel’s general manager.

Despite the dour forecast, Molinari says there are no plans to offer deep discounts to Hotel Haya’s planned average daily rate of $189 per night.

At the same time, the low occupancy rate may not be as dire as it sounds. New lodging properties like Hotel Haya — named after a Ybor City cigar pioneer — typically plan for a three-year “stabilization” period with low occupancies and rates until they can ramp up and maintain solid performance.

Perhaps surprisingly, Molinari says Haya’s biggest challenge thus far has been in finding quality staff. The hotel purposefully hasn’t filled 10 positions because of anticipated occupancy, and the employees on board — 67 to date — are being trained to cope with COVID-19-inspired rules.

“Opening at this time, we’re able to start from scratch and nip any bad habits,” says Molinari, who came to Hotel Haya from Aparium’s property in Minneapolis, the Hewing Hotel.

 Molinari says that the Haya’s unique embrace of the past and Ybor City’s culture, together with design elements like Ybor-inspired lighting and Alfonso Architects design, will help it stand out.

“We have 120 years of culture here, under one roof,” Molinari says. “We think we’re the only hotel in the Tampa area, along with the Don Cesar, that blends in with the community so well.”

He notes the 1412 E. 7th Ave. hotel received an “overwhelming response” in its first weekend, with two live music shows that were well attended and a Sunday yoga class that was sold out.

Beginning tomorrow, Haya is scheduled to be the setting for 10 weddings.

He acknowledges, though, that the hotel’s short-term success will depend on consumer confidence in airplane travel and on finalizing and widely distributing an effective COVID-19 vaccine.

“We’re not naïve,” Molinari says. “In the first quarter of next year we’ll learn a lot.”

Collier International’s Schwarz contends that sustaining its room rate in Ybor City may be Haya’s tallest hurdle.

“The question is whether Ybor City is a roughly $200 a night market?” he says. “If someone wants to come to Tampa, typically they go to the beaches, or downtown. But people like unique places and Ybor is certainly that. And if anybody can make a hotel there happen, Aparium will.”

Aparium’s Kitchen, for his part, hopes that in five years Hotel Haya will continue to be an essentially “relevant” part of Ybor City and Tampa Bay, thanks to its focus on the local community and customer service.

“People may go to a place once because it’s cool, but they come back again because of great service,” he says. “That’s what we look to be, and there’s a lot of belief in our business model long term.”

 

 

 

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