Bruised but hardly broken
North Central Group builds on future plans.
The U.S. hospitality industry was among the hardest hit from COVID-19 in 2020 as travel was restricted and thousands of hotel and restaurant jobs were lost nationwide. Many workers have not come back.
In August, the North Central Group — a Middleton-based hotel developer with a growing portfolio that includes more than 30 hotel properties in Wisconsin, Illinois, Colorado, and Arizona — celebrated 40 years in business. The company has withstood economic challenges before, the fallout of 9/11 and the Great Recession among them, but 2020’s global pandemic was different, notes CEO Jonathan Bogatay, because of its effect on both global economics and human health and safety.
He’s seen firsthand the damage hoteliers suffered in 2020. In Dane County alone, the company owns 10 properties, including the AC Hotel Madison Downtown plus a restaurant on Rimrock Road.
Recently we asked Bogatay about NCG’s post-pandemic plans for new hotels as pent-up demand was flipping both the industry and the economy.
Looking back, how bad was 2020?
In the hospitality industry, 2019 was record setting, so we entered 2020 with high expectations. Unfortunately, COVID hit in mid-March and by April we were fully impacted with stay-in-place orders.
As a comparison, our portfolio of (Hilton and Marriott brand) hotels on Dec. 31, 2019, ran 74% occupancy at a rate north of $135. By the end of 2020, the portfolio was running 43% occupancy at a rate of $107. That’s nearly a 53% drop in total revenue.
Impact isn’t a strong enough word. Hospitality — hotels, restaurants, retail — everything was affected.
What was the game plan?
We focused on two words: survive and thrive. Nothing was more important than the safety and well-being of our team members and our guests. We were designated “essential,” so we remained open and operating when the National Guard and the traveling nurses needed a place to stay. That’s how we survived, but we also had to thrive.
We had a lot of learning to do. We went all-in with safety protocols. We partnered with Hilton and Marriott to take care of our team members and guests and redefined clean in terms of sanitation, touch points, and every piece of linen. We made check-ins nearly touchless, allowing frequent travelers to select their own rooms online using a digital key, check in with their phones, and go directly to their rooms using a unique RFID lock system that resets when they check out. Everything has a heightened sense of cleanliness now, and I think that will continue.
Did layoffs result?
Unfortunately, yes. We reached a point where hotels that typically ran about 70% occupancy were running 7%. There just weren’t enough rooms to clean or guests to check in.
As we began to see business return, we were very aggressive in returning those team members to work. Hourly members anxious to return were incredibly flexible too. Being flexible on schedules, roles, responsibilities, and cross training was critical, and that was a great testament to our culture.
Were all NCG hotels similarly affected by the pandemic’s fallout, regardless of location?
In our world, the buckets were very clear. Our portfolio hotels in Arizona recovered very quickly. They loosened their standards for baseball spring training and chose to continue with events but still enforced social distancing and masking, so hotels were able to adjust. People made reservations to use the pools in our hotels, which created an ability to enjoy the warm weather. Our occupancies there were very high as a result.
Things were different in the Midwest. We were coming out of winter, not having meetings, and being restricted to 10 people or less. Just prior to the pandemic we opened Liberty Station, a ribs place on Rimrock Road. Immediately, it was hit with a 25% capacity limit, so it was more challenging, especially for business-oriented companies in Dane County. Leisure locations performed much better.
We’re seeing positive signs with 65% occupancy and a rate north of $100. I believe that will take care of itself as businesses reopen, people return to offices, events and leisure activities resume, and people begin feeling safe again, but it will take some time. It’s not if hospitality can come back, just when.
Let’s talk growth and NCG’s future.
Yes, please! We purchased the Crowne Plaza on East Washington Avenue, and it emerged as a beautiful, renovated DoubleTree by Hilton Madison East in 2020 — perfectly positioned for corporate meetings and events.
We announced plans for the fun and tech heavy Moxy by Marriott, also on East Washington near the Sylvee. It’s being billed as a bar with guest rooms on top! And most recently, the Milwaukee Bucks and NCG announced plans for The Trade Milwaukee, an Autograph Collection Hotel by Marriott that will be built across from Fiserv Forum. Moxy and The Trade will open in 2023, so there’s no doubt we’re focused on growth.
With the current workforce shortage, particularly in hospitality, is there a risk of being overly optimistic?
Certainly, our top three challenges now are labor, labor, and labor! We need people in the workforce and believe strongly that they’ll return soon. We’ve increased our starting wage for new employees and increased pay for those above them. We want to pay fair. We aggressively recruit before we open hotels and by the time The Trade and Moxy open, we’re banking on the workforce being there.
What lessons have been learned, in your opinion?
It’s been a difficult balancing act. There was no playbook for a global pandemic. I understand the health department’s desire to get ahead of it, but some might argue it was overwhelming. If, God forbid, we see this pandemic resurge, it’s my belief and hope that the vaccine will help mitigate some of the spread and the variants, as well.
Masking has proved effective, and we know now that there are steps that we can take versus closing everything down. I think we’ve all learned better ways to keep people safe and businesses afloat.
On a personal note, are you from this area?
I was born and raised in Cleveland. My dad owned a roofing company in Virginia before moving there. I knew I couldn’t be a roofer because I’m afraid of heights!
What do you do when you’re not working?
I buy, collect, and restore classic cars. I’ve owned 85 in my lifetime, but I have seven now. My favorite is a 1966 Corvette Roadster that’s being worked on. I also love to read, and usually complete 20 books a year.
Having been in hospitality all your career, what are parties at the Bogatay household like?
We don’t do that often, but when we do, I’d say they’re pretty over the top!
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