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Downtown Denver’s hotel industry is struggling. Is it because people don’t want to be in the city center?

Even if a coronavirus vaccine comes, the hotel and convention industry can’t just hit the restart button. The uncertainty of recovery means events are getting canceled through mid-to-late 2021.

Workers finish up construction on the new entrance to the Sheraton Denver Downtown Hotel on the city's 16th Street Mall on Sept. 9, 2020. The hotel is nearing completion of an $80 million remodeling project. (John Ingold, The Colorado Sun)
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The Sheraton Denver Downtown hotel, nearing the completion of its $80 million renovation, is operating at about a quarter of its usual capacity. Business in the time of the coronavirus has picked up a bit from the disastrous early months, but even if a vaccine were announced tomorrow, the hotel doesn’t expect to get back to full capacity until the end of 2021.

Nearly 70% of its business comes from hosting large meetings or housing business travelers attending events at the nearby Colorado Convention Center. Most of those events have been canceled or moved online for the next year. The Convention Center? Its exhibit floor is a designated COVID hospital until Sept. 12, though it has not been used for any patients. 

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It’s not just that the conventions and conferences aren’t happening these days. Here is what else is bad for business: Guests are reporting that they’re scared of the downtown area, that the 16th Street Mall — once one of the city’s prime tourist attractions — is now filled with too many panhandlers and people sleeping outdoors. A corporate parking garage customer asked the hotel for a security escort for its workers who must walk across the mall to their office at Republic Plaza. 

“They’re finding it very unsafe. It’s the amount of homeless downtown, the encampments,” said Tony Dunn, the Sheraton’s general manager. “We see in our guest commentary right, now since we are getting some customers back, they’re saying, ‘Love your renovation. Great new rooms. Your staff are great. What is going on outside your building? It’s unsafe. We don’t feel comfortable walking down the street. We would reconsider ever staying here again due to the fact that we don’t feel safe.’”

The Sheraton’s situation is not unlike what’s happening nationwide, especially in urban areas that normally attract commerce, conventions and business travelers with expense accounts. And the hotel’s problem is one shared by businesses throughout downtown Denver, which is now nearly devoid of the office workers who used to fill the streets during the day and stood in long lines for fancy salads over the lunch hour. 

Several business owners reported to The Colorado Sun that the situation is getting worse, and at least one company already moved to the suburbs.

“I challenge anyone to walk a single block on the 16th Mall, the heart of downtown, and not see, smell or step in all of the five P’s — pee, poop, puke, pot and panhandlers,” Mark Cutright, manager of RTA Petroleum, wrote in a letter to Denver Mayor Michael Hancock’s office.

MORE: Downtown Denver is starving for people. When will they come back?

The small engineering company that operated out of downtown for several years officially vacated Sept. 1. The firm moved from The University Building at 16th and Champa streets, formerly home of William Crow Jewelers, to the south suburb of Centennial.

“Denver, as the largest city on the Front Range, is very important to the region and without a healthy core, I fear for the Front Range,” Cutright said.

There has been an increase in people who are homeless in the city since January. Denver Homeless Out Loud volunteers counted 664 tents — estimated to be sheltering 1,328 people — on a single night in downtown Denver in July. That’s about 30% more people than the annual census taken in January (which was at nearly twice the number from a year earlier).

The coronavirus impact on unemployment has been staggering. At the end of August, there were nearly 280,000 Coloradans receiving some form of unemployment benefits, or more than four times the average weekly number in 2010, during the Great Recession. And without a job, it’s hard to pay the rent.

Tents lining the sidewalk next to St. John’s Cathedral in Denver’s Capitol Hill neighborhood. The camp grew to dozens of tents and as many as 80 people wrapping most of the city block before it was swept in a pre-announced action by the City of Denver on May 20. (Eric Lubbers, The Colorado Sun)

But homelessness in the city isn’t new and has long been cited as a negative factor in surveys of visitors, said Tyler Jaeckel, director of policy and research at The Bell Policy Center.

“That’s been true pre-COVID and I’m sure it’s probably true now. And I think that’s true of most major cities across the country. I don’t think Denver is unique in any way,” Jaeckel said. “With that being said, I don’t want to say that homelessness is not a problem. I think it has been a problem and continues to be a big problem. … In my mind, it’s not a Denver issue but a state issue.”

It’s difficult to know how much of the city’s future convention, meeting and hotel business has been impacted directly by COVID safety measures versus the growing homeless population downtown.

But the Colorado Convention Center puts the economic devastation at nearly $1 billion. Some 64 events at the convention center plus another 505 at individual hotels were canceled, which were projected to bring in $703 million and $203 million, respectively, in direct and indirect economic benefits.  The indirect part reflects added sales for nearby restaurants, stores and services that are now lost because of fewer visitors.

“These cancellations are for groups that would have met between March and December of 2020,” Rachel Benedick, Visit Denver’s executive vice president of sales and services, said in an email. “We are in conversations with our first-quarter groups and they are all discussing their options.”

Police calls along 16th Street Mall are down 

Whether a business can recover may just depend on where it is downtown. Closer to the Capitol,  summer protests supporting or opposing racial justice or defunding police have been lumped together with vandalism, anarchy and civil strife

J.W. Lee, president of the Wasabi & Menya Group of restaurants, said all of Menya’s restaurants have reopened for in-person dining except one: the Capitol Hill location, near Colfax and Washington.

“I got vandalized,” Lee said. “Glass was broken at Colfax. Myself or yourself, would you go there? There’s no point to opening that business.”

The McDonalds on the Broadway end of 16th Street Mall remains boarded up August 24, 2020. (Eric Lubbers, The Colorado Sun)

RTA Petroleum manager Cutright, who wrote the mayor’s office about the five P’s, cited the city’s “failure to control the riots” or control the homelessness crisis as his main reasons for moving the business to Centennial. The oil company executive also complained about the parking situation and a lack of progress in improving the light-rail system, which “will continue to decline as people avoid public transportation and use personal cars” because of the coronavirus pandemic. 

Cutright said the mayor’s office has not yet replied. 

The Denver Police Department has a dedicated homeless outreach team that primarily works downtown and focuses on connecting people who are homeless with shelters and other resources. A spokesman said the police department’s budget was cut because of the pandemic and that it doesn’t have the resources to assign additional officers to the problem areas downtown, including around the hotels. 

MORE: Denver’s vacant office space is piling up, but don’t blame coronavirus and work-from-home trends

“DPD hears their concerns and values their partnership, however, due to budget cuts brought on by the pandemic, DPD is unable to allocate additional resources in response to their request,” the spokesman said. 

Dunn, who is also chairman of the Colorado Hotel and Lodging Association, said he realizes money is tight but there’s a snowball effect. If guests aren’t booking rooms in the city, that means fewer tax dollars to provide revenues for future city budgets.

“Everybody’s been cut back and I get it and I understand it,” Dunn said. “But if we don’t have any tax dollars because our stores are closed and my hotel, what if my hotel closed? What if you had a 1,230-room hotel on the mall sitting empty? … We talk about having no tax dollars today, but tomorrow, it’s going to be worse.” 

X marks the spot of the temporary entrance to the Sheraton Denver Downtown Hotel on the city’s 16th Street Mall on Sept. 9, 2020. The hotel is nearing completion of an $80 million remodeling project. (John Ingold, The Colorado Sun)

While downtown, with fewer workers and more folks who are homeless, might seem less safe these days, the statistics don’t support that. 

Crime is in fact down along 16th Street Mall. The Denver Police Department “calls for service” along the mall have been nearly 30% lower from March 17 to Sept. 1 than they were during the same time period in 2019. 

Of course, this mainly is due to the fact that downtown has far fewer people this spring and summer than it did last year. 

While police initiated 914 calls for service during that time frame last year, they initiated 803 this year, a 12% drop. Citizens called for police assistance 1,600 times in those four and a half months last year, but called 977 times this year — a 40% drop. 

The calls for service include everything from a person sleeping on the sidewalk to a robbery or shooting. The data includes calls along 16th Street, from Broadway to Chestnut. 

Cathy Alderman, a spokeswoman for the Colorado Coalition for the Homeless, said that when stay-at-home orders went into place in March, some people who didn’t have a home stayed on the streets. The rise of encampments is a sign of the growing economic disparity as folks have increased difficulties finding affordable housing and, due to coronavirus impact, a job. But this is an ongoing issue, she said.

“I don’t feel like Denver is less safe now than before the pandemic,” Alderman said. “We certainly had some civil unrest, and we’ve seen protest activity, and we’re experiencing spikes in crime here and there, but to attribute that to homelessness paints too broad of a brush.”

Hotel rooms are at half price, low occupancy 

Hotels suffered the brunt of coronavirus layoffs and furloughs in March and April, with storied establishments like the Brown Palace Hotel & Spa in Denver or the Broadmoor Hotel in Colorado Springs closing for two months. Hotels were considered critical businesses and allowed to remain open, but many closed anyway as demand dwindled and travel pretty much stopped. 

The recovery has been much worse for hotels in Denver, which saw their average daily rates plunge to $70.17 in April, nearly half what they charged a year earlier. And occupancy rates fell to 21.2%, according to STR, a company that tracks the hospitality industry. Statewide, hotels saw higher occupancy rates and average rates than Denver’s as tourists returned.

In Denver, average daily rates improved in July to $89.55 per night with 44.5% of the rooms occupied. Both of those numbers are about half of what they were a year ago.

Top-25 markets, including Denver, have been “hit disppropriationaly harder because that is where large meetings normally go to meet,” said Jan Freitag, STR’s senior vice president of Lodging Insights. “There are no corporate groups, there is no meeting demand to speak of. And there is limited corporate demand. Now, Denver is lucky in that it’s close to nature, close to the Rockies and that has been very attractive this summer as people holed up at home for 100 days said they need to get out.”

But STR doesn’t see the convention and business traveler market fully recovering for another year. 

“We’re talking right now, realistically, about a real recovery in group travel being next summer or maybe next Labor Day,” he said. “Because keep in mind, what will make people come back into a ballroom with 200 to 300 people? They need to feel safe.”

During March to July, hotels were the among the most frequent types of businesses warning about furloughs and layoffs, according to Worker Adjustment and Retraining Notification filings with the state Department of Labor and Employment. More than 11,000 hotel workers were impacted, but plenty of others were among the unofficial job cuts in the hospitality industry, which led the state’s new unemployment claims each week since March. 

MORE: Homeless camps in downtown Denver are “out of control” as the pandemic drags on. So what’s the solution?

But for now, there’s a 100-person limit on the number of people who can congregate in indoor spaces, provided that the room is big enough to allow it. Variances are available, but according to a social-distancing calculator used by the state’s Department of Public Health & Environment, 100 people can fit in a 20,000-square-foot room. To host a crowd of 1,000 guests, one would need a 200,000-square-foot ballroom. The Sheraton Denver has 131,670 square feet of event space available. 

And without knowing when those restrictions will be lifted, uncertainty is what’s really hurting the industry, said Dunn, with the Sheraton Denver hotel and also chairman of the Colorado Hotel and Lodging Association. 

“There’s pent-up demand to have meetings, but these meetings take months if not years (to plan). People say, ‘I don’t even know if I want to book in 2021 because, based on what I see today what the restrictions are, I don’t know if I’ll be able to have 1,000 people in your building,’  and we can’t tell you yes or no either,” Dunn said. “We’ll all be doing small, 50-to-100 person meetings, which is fine because they’re the short-term stuff that happens year to year. But the big ones book seven years out. (Everyone) is staying away from 2021.”

Guests and travelers will feel safer when there’s a vaccine or a very rapid saliva test so travelers are tested before they board a plane or as they enter a hotel lobby, Freitag said. Only then will meeting planners start rebooking events. Freitag strongly believes business will return.

“After 9-11, we felt we’d never fly again. And we were wrong. Post 2008, we thought we’d never be in a resort again, and we were wrong. So you know the Mark Twain quote, ‘The rumors of my death are exaggerated’ is very true,” he said. “People want to travel, people want to meet. Right now they can’t. But they will again.”

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