CORONAVIRUS

City-owned DoubleTree Hotel reopens after monthslong closure

Cedar Rapids officials see long road to industry's recovery

Carmen Gronewold talks Thursday on the phone from behind a plexiglass screen at the reception area at the DoubleTree by
Carmen Gronewold talks Thursday on the phone from behind a plexiglass screen at the reception area at the DoubleTree by Hilton in Cedar Rapids. The city-owned hotel reopened Thursday with a limited capacity and enhanced cleaning protocols in place. (Rebecca F. Miller/The Gazette)
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CEDAR RAPIDS — Cedar Rapids officials say they’re not inclined to consider selling the city-owned DoubleTree by Hilton any time soon, though the question remains of when would be the prime time to find a private owner.

The DoubleTree, which was closed March 26 because of the coronavirus pandemic, reopened Thursday with new cleaning standards, slowly bringing the downtown complex back to life and funneling money once again into the city’s hotel-motel tax revenue stream to support area not-for-profits.

Casey Drew, the city finance director, said the projected revenue losses from the shutdown are proprietary information that cannot be released to the public. The costs of operations and maintenance during the more than three month closure were covered by the hotel reserve fund, he said.

The city continued to set aside about $125,000 for future renovations, Drew said, and another $75,000 for operations such as heating and keeping the lights on during the closure.

Cedar Rapids collected a total of $3.9 million in hotel and motel taxes from guests at all venues in the 2019 budget year, according to the Iowa Department of Revenue. Revenue taken in as of May 27, accounting for the a three-month period starting at the end of February, exceeded $641,145 — about $205,000 less than what the city brought in from the tax in May 2019.

The downward trend in revenue from hotel guests is mirrored across the United States. The American Hotel and Lodging Association reported in June a drop of $16.8 billion in state and local tax funds from hotel operations this year.

Moody’s Investor Service has repeatedly cited the city’s ownership of the DoubleTree as a potential “risk.” In giving Cedar Rapids the second highest bond rating of Aa1 in May, Moody’s said hotel revenues are “declining substantially” but the city did not face immediate credit risk because of the pandemic, as the “modest size of hotel operations compared to the city’s budget” partially offset those concerns.

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The city bought the 275-room, Crowne Plaza Five Seasons Hotel from a creditor in 2010 for $3.5 million and reopened it in 2013 after spending more than $40 million to renovate it as a new adjoining Convention Center and U.S. Cellular Center.

The city ownership was intended to be temporary, and Cedar Rapids officials over the years have debated when to sell the property given its complexities as a hotel accompanied by a convention center with an 8,000-seat arena.

The hotel has not impacted the city’s finances, Drew said, adding that the city is proud of the hotel and for how Hilton has managed it.

“I think we’ve done a good job as the city’s management team of making sure that we’re not spending more than what we’re bringing in at the hotel, so even an incident like this where you couldn’t have predicted this happening and had this three-month shutdown, we’ve built enough reserves for that hotel to weather the storm,” he said.

Given the financial struggles hotels face across the country amid COVID-19, he said, “it’s probably a time where you can’t even consider” selling the DoubleTree. The city’s contract for Hilton to manage the hotel runs through 2024.

“Would it be looked at in the future? I think you just have to kind of wait and see how best did the hotel industry bounce back.” he said.

Council member Ann Poe said COVID-19 paused normal business across the city. With a number of variables remaining, such as the recent spike of cases in Iowa and potential for a second wave of the pandemic toward the end of the year, she said there’s little certainty of when would be the best time to put it on the market.

“Cities don’t own hotels ... but certainly I think when it gets to a certain point and we feel comfortable with it, I think there’s a desire by council members to sell it — I know there is on my part.”

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Because hotel-motel tax funds are distributed to local not-for-profit organizations that depend on this revenue stream, she said there’s a circular effect financially, and it’ll be a positive to see the DoubleTree operating once again.

Jay Anderkin, the hotel’s general manager, said most large events have been rescheduled for 2021 or 2022, and the meeting spaces allow for 6 feet of space to promote social distancing. The staff are also implementing health safety standards such as offering contactless checkout and using room seals to ensure rooms are sanitized and disinfected before new individuals enter.

He said the hotel stayed in touch with many of its top business clients and travelers, as well as people whose meetings there had been canceled or were still on the books, to inform them of the complex’s reopening in addition to its normal marketing and advertising efforts.

Anderkin said hotel policy would not allow him to discuss workforce levels or capacity, but noted “it’s not like the doors are going to be busting down with customers at the beginning.”

“Our industry’s going to have a slow build,” he said.

Council member Scott Overland, chair of the city’s Finance and Administrative Services Committee, said it would take at least a year or two until the hotel market recovers, so he didn’t anticipate the council would take up the matter of selling the hotel anytime soon.

“It would not make any sense at all to even consider that at this point in time based on what’s going on in the hotel industry and the leisure industry in general,” Overland said.

He said the hotel has become a critical asset to the downtown area — drawing tourists and attracting the businesses, restaurants and entertainment venues that serve them.

There’s $33.95 million in outstanding debt on the hotel, according to Drew, and Overland said it didn’t make sense to sell it while the city’s paying it at a good rate.

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As the largest contributor to the city’s hotel-motel tax funds, he said the hotel’s reopening will help regenerate that revenue stream and also influence the recovery of other area hotels.

“Right now our focus is on Hilton’s management bringing it back online, and they will add back additional workforce as they need to, but we’re very excited to have the hotel open again,” Overland said. “It’s the first step toward getting things closer to normal once again.”

Comments: (319) 398-8494; marissa.payne@thegazette.com

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