In Focus: In an industry ravaged by COVID-19, Evanston hotels struggle to make ends meet

November 5, 2020

Last fall, David Reynolds was hesitant to sell his hotel.

The Homestead, a boutique hotel, had been an Evanston mainstay in the hospitality industry since before the Great Depression. For nearly 40 years, Reynolds and his wife had owned the historic hotel, a mid-rise brick building located off Hinman Avenue, filled with uniquely decorated rooms and a collection of media created by former guests.

He had hoped to keep the Homestead for a few years longer, but saw an opportunity to put it up on the market before retiring and took it. The hotel market is cyclical, he said, with strong upswings only coming once every 10 years or so.

In October 2019, Reynolds sold the Homestead to Graduate Hotels, a chain focused on markets in college towns like Evanston. The deal guaranteed Reynolds and his wife a strong financial opportunity, and he didn’t know when another offer would come.

Just five months later, COVID-19 struck, causing a recession comparable to the Depression. Hotels across the nation saw sharp decreases in revenue as travelers canceled their plans.

As a result, many notable locations have shut down, either temporarily or permanently, even Chicago’s Palmer House Hilton, which had previously only closed its doors after its original building burned down in the Great Chicago Fire in 1871.

Hotels across the nation have been dealt a blow by COVID-19 that could be impossible to survive. According to a September survey from the American Hotel and Lodging Association, two-thirds of hotels will only last six more months without more government aid, and 68 percent are still working with less than half of their typical staff.

As COVID-19 relief package negotiations have stalled in Congress, the AHLA has called on legislators to pass additional aid bills supporting the hospitality industry — but efforts have been unsuccessful so far. Though some chains may have the infrastructure to survive without aid, the pandemic is hitting locally owned hotels particularly hard. Even hotel chains that survive might not do so without significant losses.

This phenomenon has been especially prevalent in Evanston, where multiple hotels have suffered extensive losses and temporary closures.

For Reynolds, any hesitation he felt when he put his hotel on the market evaporated after seeing the state of the industry just a few months later.

“We miss running it, but we feel very lucky to have sold it when we did, and to have sold it to someone who has the wherewithal to get through this pandemic,” he said. “They have deep enough pockets that they can withstand this and take care of the building at the same time, and that’s important to us.”

Not everyone was able to retire from the industry like Reynolds or be financially cushioned by large chains. For those still working to keep Evanston hotels afloat, the pandemic has brought challenges they could never have prepared for and forced them to face a new reality within the city.

A struggling industry

Industry expert Carol Brown said in all her nearly 40 years in hospitality, she’s never witnessed hotels closing at the rate they have during the pandemic.

Brown, the chair of the Hospitality and Tourism Management Program at Roosevelt University in Chicago, has long told students hotel shutdowns are nearly impossible. But the impossible happened.

“I tell students, and it was told to me when I was a student, that you better get used to the hotel industry, because hotels never close, never — they never go dark,” Brown said, who has also held management roles in hotel chains like Sheraton Hotels and Resorts. “But what we’ve seen in the pandemic is hotels that literally went dark, meaning lights off, no guests, no employees, nobody working there.”

Earlier this year, one of Evanston’s biggest hotels went dark. The Hilton Orrington/Evanston closed for an extended period of time, only reopening this fall. In August, the Margarita European Inn shut its doors until the beginning of 2021 — though that reopening date is still uncertain.

Brown said most hotels remaining open are only functioning at between 10 and 30 percent of their capacity. Generally, healthy occupancy for a Chicago-area hotel is around 75 percent, she said.

Evanston isn’t exactly a notable tourist destination. Those who visit for pleasure typically fall into three categories: people looking to spend time in Chicago without paying downtown rates, Northwestern visitors and local travelers from within the state and surrounding area. But a decrease in travel — both for pleasure and for business — has generated a decrease in hotel traffic.

Gina Speckman, the executive director of Chicago’s North Shore Convention and Visitors Bureau, said many of Evanston’s businesses draw in hundreds of guests at a time for industry conferences. These conferences — and their guests — are all housed in Evanston hotels.

But now, none of those conferences are happening. Since June 26, Illinois has been in phase four of its COVID-19 relief plan, and officials have recently implemented more mitigation efforts to combat a surge in cases. Though hotels are allowed to open, the state prohibits any gatherings of more than 50 people. As a result, large-scale events, which have been pivotal drivers of revenue for Evanston hotels, have been canceled or moved online.

“(The cancellations have) cut off the meetings market — conferences, conventions, really any social events that we work with in terms of weddings, or any kind of reunions or gatherings,” Speckman said. “It’s really hard to have them with a limit of up to 50 people.”

The impact of these cancelations and subsequent hotel closures extends far beyond the travel market. All aspects of hospitality are interlinked, Speckman said, as visitors spend their dollars at local restaurants, shops and other businesses.

[Read about the difficulties Evanston businesses were dealing with before the pandemic.]

Annie Coakley, the executive director of Downtown Evanston, said large events have previously played a key role in the city’s economy. Without them, many businesses are seeing significant decreases in revenue.

“If you have a meeting or conference, you’re definitely going to see a spike in reservations at restaurants,” Coakley said. “Three hundred people at the Hilton Orrington or the Hilton Garden Inn for a conference or meeting — those are also things that we definitely rely on for the general economy of Evanston.”

The pandemic’s unpredictable nature makes estimating the length and depth of its effects on hotels difficult. Though travel and tourism has gradually resumed, hotels may not recoup the lost revenue, and the current low income flow may not be sustainable.

Paul Zalmezak, the city’s economic development manager, said Evanston saw sharp decreases in income from hotel taxes after COVID-19 struck. He said city tax collections on hotels went down significantly, dropping 84 percent from May 2019 to May 2020.

As a result, Zalmezak said the future of local hotels may be grim. He said he would not be shocked if one or more Evanston hotels closed their doors forever.

“Can all of the hotels survive?” Zalmezak said. “Can Evanston have five hotels, operating at 10 percent occupancy with limited bailout money? I don’t know the answer. It wouldn’t surprise me if we see the number of hotel rooms shrinking in Evanston after this.”

More than just a hotel

At the beginning of the pandemic, some local hotels took on a new role: providing shelter for people experiencing homelessness in Evanston.

Local nonprofit Connections for the Homeless started fundraising immediately, and struck a deal with multiple hotels to house people experiencing homelessness during the pandemic. Jennifer Kouba, Connections’ associate director of development, said COVID-19 heightened the need to find housing for the city’s houseless population. Given their inability to sustainably shelter in place, their risk of exposure increased.

Soon after Connections began moving people into hotels, the city offered its help. From March through the end of May, when Illinois’ shelter-in-place order ended, Kouba said the city provided $715,000 in funding for the project. Additionally, Connections has received financial support from multiple Evanston organizations, including the Evanston Community Foundation.

Kouba said Connections for the Homeless is committed to finding permanent housing solutions for all residents currently living in hotels. While some hotels have since reopened their doors and ended their partnerships with Connections, she said the group has one current partner committed to providing a long-term housing option through the spring of 2021.

Additionally, Connections has intentionally reinvested money into local businesses since beginning their partnerships. Kouba said over the course of the past seven months, the program has invested approximately $3 million into the Evanston economy.

“Homelessness requires a community response,” Kouba said. “And when every member and stakeholder within a community stepped forward to address the community’s largest challenges, that’s when a real difference can be made.”

Opening the doors

Despite the industry’s current crisis, Graduate Hotels has big plans for Evanston.

The company opened Graduate Evanston on Oct. 16, hoping to cater to the interests and needs of families of students in college towns. However, Reynolds said the ability to adjust to a new or expanded hotel in the Evanston hospitality market often takes multiple years — even in non-pandemic situations.

“If someone were to build a 200-room hotel in downtown Evanston, everyone would probably be pushed below breakeven,” Reynolds said. “The ability to make a profit is very tied to capacity, and it takes several years to absorb the introduction of a new hotel.”

Eric Smith, Graduate Evanston’s general manager, said it was necessary for the hotel to open in the fall. He said his team had to adapt to the pandemic as they tried to build connections in Evanston, and significant safety precautions were put in place for guests.

Smith said he had low financial performance expectations going into the hotel’s opening. Instead, he said he hopes to provide the best experience for guests possible.

“You can go anywhere and see, this industry and hotels have been really ravaged by the pandemic, from some of the largest companies to the smallest ones,” Smith said. “As we strategize about how we open, our goal is to open it safely, and have those expectations of making sure that it’s about the experience.”

Left behind by a failing industry

Throughout the pandemic, big hotels and corporations have struggled to make ends meet — and like other industries, they have turned to furloughs as a method to reduce deficits.

Most hotels have had to make significant staffing cuts, especially those that closed for any length of time. As a result, many employees saw significant reductions in pay for the year.

Since March, the state has already lost over 67,000 hotel jobs, with more losses on the way and no immediate prospects of relief. In September, Chicago-area hospitality employees staged a protest downtown in support of the 7,000 hotel workers in danger of losing their health insurance soon.

Paulette Robinson, a longtime employee of multiple Marriott hotels, was one of the thousands of Chicago hotel workers impacted by the pandemic. Robinson told the Chicago Sun-Times in September that she couldn’t understand why, after cutting their pay, many hotels were slashing workers’ benefits as well. Furloughed employees have also had trouble finding new jobs given the struggling industry.

“I guess they’re waiting for us to die,” she told the Sun-Times. “They should have some sort of empathy, especially because they took our jobs. They could at least help us with health care during this time.”

Many hotel employees already fall below the United States’ median personal income, which was $34,317 in 2018, according to the U.S. Census Bureau. The median salary for hotel clerks in 2018 was just under $26,000, and a hotel housekeeper’s median salary was about $26,500 in the same year, according to the Bureau of Labor Statistics.

Local hospitality unions did not respond to multiple requests for comment.

In Evanston, Reynolds, the former owner of the Homestead, said when he sold the facility to Graduate Hotels, he made a verbal agreement with the company that all his workers would be kept on as employees at the new hotel. But a few months after the sale, he said all the former Homestead employees were let go, leaving them unemployed right before the start of the pandemic.

Graduate Hotels declined to comment on the matter.

Additionally, the decrease in travel has affected incomes for independent hosts, like those who rent out space to guests through Airbnb. Liz Bulf, an Evanston resident and Airbnb host, said hosting is cyclical based on frequent travel times. However, at the beginning of the pandemic, she said the company’s potential protocol changes were initially unclear for hosts.

“We’re pretty autonomous, but they did initially relax their standards for cancellations,” Bulf said. “When no one really knew what was going on, they eased their restrictions.”

As long as the pandemic persists with limited financial financial relief, layoffs will likely continue, Brown said. Many hotels have already removed a significant portion of middle management positions, she said, and the uncertainty has also prompted droves of people to depart the industry.

The Northwestern connection

A significant portion of many hotels’ revenue in Evanston may come from large conferences and events, but the University is also a major driver of traffic and dollars to the city — which holds true in most college towns, and is why Graduate Hotels has seen success with its business model.

In fact, Zalmezak, the city’s economic development manager, said before the pandemic, the city was a point of interest for some hotel chains looking to expand because of the University.

But many students are now living at home, and large-scale events like football games, commencement and Wildcat Welcome have since been canceled. As a result, NU’s Executive Director of Neighborhood and Community Relations, Dave Davis, said the city’s economy is likely to continue to see a downturn across the board.

“Given the reduction in density, there’s also a direct correlation in the reduction in economic activity by our students,” Davis said. “Our students play a huge role in sustaining the local businesses in downtown Evanston, because they go to restaurants to eat, they patronize the local shops and stores, they spend money for entertainment purposes, and they’re also engaged in the local community.”

In addition to students’ impact on the city, Davis said a significant number of Evanston’s visitors are also driven by the University. In 2019, he said NU saw 60,000 confirmed visitors at its visitors center, and an estimated 200,000 other travelers who came to the city for some reason related to the University.

With the cancelation of many University events, those numbers have sharply dropped.

Though the hotels saw some use from students and families at the end of the 2019-20 school year, Speckman said the reservations that survived were minimal, falling short of expectations many hotels had prepared for.

“The rates are higher during commencement and other busy Northwestern-related times, and with graduation being effectively canceled, that was a big hit,” Speckman said. “Some people still came — there’s still people that came and took pictures, and parents still had to pick up their kids. So it didn’t drop to nothing, but the majority of those rooms were not used.”

Learning to pivot

Evanston hotels may have been dependent on the University to bring in a significant portion of their revenue, but NU might be one hotel’s saving grace.

After the University announced that freshmen and sophomores couldn’t return to campus, Hilton Orrington management jumped into action, announcing that it would offer long-term housing for students who were displaced by the decision.

After a deal with a third party fell through, the Orrington decided to independently take student reservations at a nightly rate. Each student living in the hotel is provided with their own fully furnished room with a bathroom.

Other amenities, such as a laundry service and meal plan, are provided at an additional cost. The hotel has not yet announced whether it plans to continue housing students after the end of Fall Quarter, and Hilton Orrington representatives did not respond to multiple requests for comment.

Maddy Foutes, a Weinberg sophomore, decided to live in the Orrington after her Greek housing fell through. Foutes said she knew another remote quarter from home would be detrimental to her mental health and make classes more difficult to deal with.

Foutes said the Orrington provided many conveniences, and living there is nicer than both dorm life and Greek housing. Though the University has announced dorms will open for Winter Quarter, Foutes said she and others have become disillusioned with the idea of university housing.

“A lot of people are like me in the sense that they were looking for something short-term. (It was) easy to get out here and not have to deal with furnishing an apartment on such short notice,” Foutes said. “A lot of people are still wondering what they’re going to do or what Northwestern will do for the rest of the year… I don’t think I’ll ever look at on-campus living the same.”

Trying to bounce back

As some Americans begin traveling again, Evanston hotels will seek to open up more as they weather the rest of the pandemic.

Though it’s impossible to tell when the country will be able to fully reopen, Davis said NU students will continue to play a key role in Evanston’s economy. Despite the announced return of freshmen and sophomores for Winter Quarter, Governor J.B. Pritzker’s October announcement re-implementing stronger COVID-19 restrictions in Cook County may minimize underclassmen’s potential impact.

“If we can’t restart the local economic engine here in Evanston… there could be some significant and unfortunately devastating consequences to the local economy,” Davis said. “That’s the reason why we’re trying to safely repopulate our campus while trying to do this as soon as possible.”

Davis said in his interactions with local business owners, he has heard multiple calls to bring students back to campus. He said the city’s economic success also impacts the University, so he hopes the relationship will continue to be mutually beneficial.

Davis said the University will continue to try to find ways to support Evanston businesses during the pandemic — including the hotel industry.

Despite the short-term losses, Brown, the hotel management expert, said she expects the industry to eventually return to its 2019 heights, which she said was the hotel market’s best year to date.

However, for many staff members, low-income employees and local businesses dependent on the traffic hotels bring to the city, the damage has already been done — and might be irreversible.

“The pandemic is not going to be forever,” Brown said. “We will emerge, but we’re going to look different when we emerge.”

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Twitter: @jacobnfulton