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E-Mail Correspondence Indicates Troubles For Hartford Hilton

KENNETH R. GOSSELIN and JEFFREY B. COHEN

October 17, 2009

Four years ago, the celebrated $33 million makeover of the downtown Hilton Hartford breathed new life into a building in such disrepair that Hilton no longer wanted its name on the hotel.

Now, the stalwart downtown business is in trouble again.

This summer, the owners of the 392-room hotel were negotiating with their lenders and the union representing hotel workers, and were seeking city tax breaks and help from the city in applying for a federal loan, documents obtained by The Courant show. The talks were an apparent effort to keep the hotel operating during a recession that has taken a deep toll on the hospitality industry nationwide.

The hotel's owner, Waterford Group, is still seeking city help for a federal loan, and negotiations with the union are still active. Whether the hotel is still in talks with its lenders could not be determined this week.

A senior city official said this week the city has "no information" that the hotel is closing although it does have concerns about the Hilton's operations.

But in June, city officials and an outside lawyer working with Waterford saw the situation as so dire that they were speculating on whether the hotel would close, or be taken over by its lenders, according to e-mail correspondence involving the mayor's former chief of staff, Matthew J. Hennessy, obtained by The Courant in an FOI request.

"If you were asking my gut reaction ... they are telling the lenders that they are not penning any more checks and will give notice of a shutdown absent dramatic action by lenders," according to an e-mail from Walter Paulekas, an outside lawyer, to city officials.

The troubles at the Hilton follow the closing at the end of last year of The Goodwin Hotel, a downtown boutique hotel. The Goodwin's owners, Northland Investment Corp., blamed long-running operating losses deepened by the industrywide downturn. The Goodwin remains shuttered.

Len Wolman, Waterford's chairman and chief executive, wouldn't comment on the hotel's future.

"Everyone's trying to work it out," Wolman said Thursday. "The hope is that we can all get something that makes sense ... and we can get through this economic downturn and get back to real success for everyone."

Ellen Thompson, organizing director for UNITE HERE, Local 217, wouldn't comment on what separates the union and Waterford.

"I can tell you there has been less business, less people working and generally fewer hours," Thompson said. "Given these are tough times, everyone who is involved in this is going to have to give something to keep good jobs in Hartford."

Thompson added, "We're prepared to do that, and we hope everyone else is, too. Everybody wants the hotel to continue on. The majority of workers are Hartford residents. These are not high-paying jobs, but they are decent. It's important from the city's perspective. It's a major downtown hotel next to the XL Center."

Saving The Union

From the start, the Hilton project has been costly for Waterford. The makeover, completed in 2005, rose to $33 million from an initial projection of $19.4 million.

In an interview with The Courant in January, Wolman said the hospitality industry's decline in this recession has been the worst he has seen in 30 years in the business. At that time, Wolman said the downturn had forced layoffs at hotels owned or managed by Waterford, but his company had not considered closing properties.

Waterford owns or manages 25 hotels in nine states, most in Connecticut. In addition to the Hilton, Waterford manages the Marriott at the Connecticut Convention Center and the Residence Inn, both in downtown Hartford. Waterford is not affiliated with the Homewood Suites on Asylum Street, a Hilton brand located in the former Bond Hotel.

When Waterford took over the Hilton renovation in 2004, the project was mired in controversy. A prospective buyer promising a major makeover had been found. But the buyer — The Procaccianti Group — was a non-union company that wanted to close the hotel and dismiss its unionized workforce.

Mayor Eddie A. Perez stepped in to exercise the city's right of refusal to block the sale. The hotel was privately owned, but the hotel was built on city land under a 99-year lease that gave the city a chance to match any sales offer.

Perez then picked Waterford as the redeveloper. Waterford also wanted to close the hotel but signed an agreement to honor the Hilton's existing union contract, a concession viewed as a political victory for Perez.

Five years later, the Hilton Hartford's future also has gotten entangled in contract negotiations with that same union, which represents about 130 workers at the hotel. The contract expired at the end of February, but has been temporarily extended.

One hotel worker Friday, who asked not be identified, said Waterford has told the union it is seeking concessions on health insurance costs, worker pensions and work rules because "they aren't making money."

Low Occupancy

Hotels in and around Hartford have suffered deep declines in occupancy as the recession has forced businesses to slash travel budgets and leisure travelers have put off vacation plans.

Through the first eight months of this year, hotel occupancy in Hartford and the immediate surrounding area fell 12 percent, to 49.8 percent, compared with 56.6 percent for the same period last year, according to Smith Travel Research, which tracks trends in the hospitality industry.

The occupancy is the lowest for the eight-month period going back at least five years.

The e-mail correspondence over the Hilton, extending into August, details how Waterford has asked for the city's help in obtaining a loan through the U.S. Department of Housing and Urban Development to create and preserve jobs.

This week, David Panagore, the city's chief operating officer, said the city is now doing its "due diligence" on the possibility of applying for a HUD loan, so he said he couldn't comment on how large the loan might be. The e-mails also mentioned that Waterford was seeking property tax breaks.

"Nothing is precluded and nothing is guaranteed," Panagore said. "We've been having discussions with them on a regular basis. Our goal is to maintain the jobs, a Class A hotel and keep the operation going on a steady state."

ON THE WEB Visit courant. com/hartford hilton to view photos of the Hartford Hilton after the 2005 renovation.