'It's Not Easy, But We're Doing It': How 2 New D.C. Hotels Managed Opening During A Pandemic

The coronavirus pandemic has created a nightmare year for the hospitality industry, but new hotels continue to open in the nation's capital, albeit in a vastly different market than they imagined entering. 

Two D.C. hotels welcomed their first guests in October: The AC Hotel Washington D.C. Convention Center and the Yotel Washington D.C. on Capitol Hill. Bisnow toured each hotel and spoke with their management about their strategy for adapting to the pandemic and their outlook for when demand will recover. 

The 234-room AC Hotel, the third D.C.-area location for the brand, was built ground-up by Douglas Development Corp. It began its soft opening Oct. 6. 

The Mount Vernon Triangle hotel was envisioned to cater to convention travelers that are nonexistent today because of the pandemic. The team had considered delaying the opening, AC Hotel General Manager Mark Namdar said. 

They ultimately decided to open because they wanted to iron out any issues before January, when the presidential inauguration is expected to boost the city's hotel demand. He said it is already fully booked for inauguration weekend. 

"We decided not to delay it because we knew that inauguration was around the corner, and any time you open a hotel there is this testing period you want to go through," he said. "There is a trial period of 30 to 45 days you want to make sure everything's working."

Occupancy over the first month has averaged around 30%, which Namdar said he is pleased with because it is in line with its competitors in the area. Roughly 70% of that occupancy has been weekend leisure business, he said, rather than the weekday convention business that would drive the hotel's demand in normal times. 

"Our business model has changed," Namdar said. "Where we used to be a Sunday through Thursday environment for convention groups, that is all gone, so our new business is the Friday-Saturday leisure market, people coming from a drivable distance."

The hotel has implemented a series of extra safety measures in response to the pandemic. It has installed barriers at the front desk, hand sanitizing stations and social distancing signs. It has removed unnecessary items from rooms and common areas, and it has ramped up its cleaning of rooms. It also gives masks and gloves to its staff and provides free masks for guests. 

"It has definitely changed our world, and we're adapting as things come up, but the key thing for us has been to make sure the rooms are perfectly clean," Namdar said. "Our cost has definitely gone higher from a year ago, just simply because it takes a lot longer and costs more to implement these processes."

The hand sanitizing stations have roughly quadrupled in price because they are in such high demand, Namdar said, and a case of gloves that previously cost $40 now costs $100. 

To offset the increased safety costs and the low occupancy levels, the hotel has been operating with about a fraction of its normal staff, he said. Namdar also manages Douglas' Moxy Hotel in Downtown D.C., and between the two he would normally have about 100 employees. It is now employing 30 people across the two hotels.

While Namdar has been satisfied with the AC Hotel's occupancy rates reaching its competitors' levels over the first month, he is concerned about what the latest spike in COVID-19 cases means for hotel demand. The U.S. set records Thursday with 183,000 new cases and 81,000 people hospitalized, according to the COVID Tracking Project. 

"The bad news is the resurgence of the virus; that's a major setback," Namdar said. "We were on the right track for a while, and then people were getting a little more comfortable, but maybe too comfortable."

To keep the hotel alive until the recovery, he said it needs to maintain at least 20% occupancy, and "anything below that is trouble." He also said it is planning to apply for the new round of grants D.C. announced this week for hotel and retail businesses. 

The hotel will soon begin bringing in revenue from its rooftop bar, Estrella Lounge, which Namdar said is expected to open in December. The indoor-outdoor bar will be open to the public through the winter, and he said it will eventually host live jazz music. 

The hotel is now offering only cold grab-and-go items to guests, but it will eventually have a hot breakfast bar on the first floor and an outdoor café, which he said will open next year. 

Namdar is hopeful about the announcements of effective vaccines from Pfizer and Moderna, and he thinks demand will begin to improve next year, but he still thinks it will be more than a year before large conventions resume. 

"We believe big conventions are going to be in 2022," Namdar said. "For 2021, the first half is going to be just a little bit of everything, and then the second half is going to be smaller groups, we believe, and then build upon that."

The room nights the hotel captures in the meantime will be at a much lower rate than it would receive in normal times. He said the hotel's rate discounts are in line with the rest of the market, which he pegged at around 50% below normal levels. 

"Times have changed," he said. "Everybody's trying to have a little bit of cash flow to pay for some of the overhead, so you've got to be a little bit flexible without giving the house away. But we still have a pretty high cost-per-occupied-room to maintain ... It's not easy, but we're doing it."

Yotel began its soft opening Oct. 16. The hotel at 415 New Jersey Ave. NW sits four blocks from the U.S. Capitol. It is a renovation and rebrand of the former Liaison Capitol Hill, which was acquired in early 2019 by BLDG Management and Metrovest Equities. 

The new ownership had planned to keep the hotel open through the renovation process but elected to temporarily close it in March because of the pandemic, Yotel Director of Sales and Marketing James Rattray said. 

When it closed, it targeted a fall opening because it had many group reservations for the fourth quarter that customers were planning to keep. Most of those have since been canceled as the pandemic rages on, but the hotel stuck to its opening schedule.

"Rewinding back to March, the entire world thought this wasn't going to be as long of an issue as it has been," Rattray said. "So they were still holding on their contracts with anticipation they were going to be here. Although we did close, the anticipation was we needed to reopen to accommodate those individuals. Things didn't pan out that way."

Many of the hotel's common areas are still under renovation, and it opened about 80 of its 377 rooms during the soft opening, with the remainder expected to open by year-end. Of those 80 rooms, he said it is running around 50% occupancy. 

"Typically a new hotel with buzz is going to drive room nights," Rattray said. "While we're somewhat successful, it's nowhere near where we'd like to be from a revenue perspective."

The hotel's safety measures include hand sanitizing stations, frequent deep cleaning of rooms, signs to remind guests to wear masks, and electronic check-in stations that don't require person-to-person contact. 

The hotel has 20K SF of ballroom space that hasn't yet opened, and its food and beverage components are still under construction.

Yotel's ground-floor restaurant, Art & Soul, is expected to open in March. It will have private event rooms, which he said are popular for congressional functions, and an outdoor patio overlooking the Capitol.

The rooftop will have a full-service bar and lounge next to a pool. The rooftop bar is also expected to open in March and will host private events, with a capacity of 250 people once restrictions are lifted. 

Rattray expects a temporary spike in demand for inauguration weekend, at which point all of its rooms will be open, but he doesn't expect a sustained recovery until the spring. 

"Obviously with the pandemic things have gotten worse, and that's going to linger into Q1," Rattray said. "Realistically we don't see things getting back to some sort of normalcy until Q2 or early Q3."

He said he is hopeful that because of Yotel's proximity to the Capitol, it will be among the leaders of the recovery as soon as people resume normal travel schedules. 

"Once we get back to normalcy, I think the Capitol Hill market will be one of the first to rebound," Rattray said. "We are one of the closest hotels to the Capitol. From a group perspective, a lot of the group visits we do are congressional visits midweek, and then leisure on the weekends."

Yotel has had to furlough a portion of the staff across all departments to make it through this low-demand period, he said. And it has lowered rates to meet the market and capture some cash flow until demand recovers.

"Our rates are very competitive to what's in the market. To be honest, they're not ideal, but we need to be competitive," Rattray said. "We're using this time to create awareness about the hotel being here, so when we're able to maximize rate we can do that."