Before COVID, Boston was one of the strongest hotel markets in the United States. Then it was one of the hardest-hit in the country as business travel all but vanished during the pandemic. But the city’s hospitality industry has made headway in the past six months, absorbing a wave of new hotels that opened in the Seaport last year. And experts predict the industry could recover to pre-pandemic levels by the end of 2023.
And by that point, there will be some new projects on the ground to meet demand.
The luxury Raffles Boston Back Bay Hotel & Residences — the first joint hotel-condo property in North America for the Singapore-based brand — is set to open early next year. A new CitizenM hotel is under construction above the Massachusetts Turnpike in Back Bay. Those projects were planned and permitted before COVID, but this month the Boston Planning and Development Agency board signed off on two hotel development proposals, among just a handful of such approvals since the pandemic.
Hotels’ average daily rate has surpassed 2019 levels in Boston and Cambridge during the past six months, according to data from Boston-based hospitality consulting firm Pinnacle Advisory Group. Demand from leisure travelers and tourists has been a key factor in the city’s hotel recovery, though business and corporate travel has picked up steam since spring, said Sebastian Colella, a vice president in Pinnacle’s Boston office. However, leisure travel — which typically dips in Boston’s colder winter months — may pull back further next year if the economy weakens further.
But real estate development projects take years, Colella notes, and for some developers, it makes sense to be ahead of the curve.
“To get a project done today, I do believe developers have to be incredibly creative,” he said.
Both hotel projects approved this month by the BPDA board — a 15-story, 98-room hotel at 104 Canal St. in the West End’s Bulfinch Triangle, and a 12-story, 80-room property at 7-9 Hamilton Place in Downtown Crossing — had been first conceived prior to the pandemic, representatives from both projects said.
While there’s potential for business travelers at the Hamilton Place project, its developers expect its location will be prime for tourists looking to hit the Freedom Trail, parents and friends visiting students at nearby Suffolk and Emerson universities, or anyone going to a show in the Theater District.
Developer City Realty Group has built apartments and condos in neighborhoods across the city, and explored developing 7-9 Hamilton Place into a residential building. But they decided a hotel would be a more valuable play, said Cliff Kensington, the firm’s director of acquisitions, with the added benefit of bringing a rooftop bar and restaurant with an outdoor deck to the public and not just a few top-floor residents. The developer plans to rehabilitate a dilapidated 1830s-era three-story building, and add nine stories, for 80 rooms in all.
“A well-done hotel is going to be more lucrative than even the best residential,” Kensington said. “We saw it as a good opportunity to check a lot of different boxes.”
COVID-19 hit during the developers’ planning process, and pummeled the global hospitality industry. But Hamilton Place was still years away, especially given the complexity of rehabilitating a historic building in a tight downtown spot. Yes, the hospitality industry would take a hit, City Realty reasoned, but demand for hotels wouldn’t disappear entirely — and they could plan, permit, and build their project during the lull.
“When we came out on the other side of it, the world of hotels isn’t going to go away,” Kensington said. “When we’re ready to go, the market will more than be there.”
Meanwhile, it’s been eight years since Woburn’s Somnath Hospitality LLC first pitched a 15-story hotel at 104 Canal St. in Bulfinch Triangle. The developer landed BPDA approval that same year, and got a building permit a few months later.
It sits halfway between the Government Center Garage and TD Garden, both of which — at the time — had major developments in planning but not yet begun. Those two projects, of course, have since transformed their corner of downtown. But 104 Canal never quite got off the ground.
Then came the pandemic. By the time Somnath was ready to restart the hotel, its permits had expired. It went back to the BPDA with renewed plans — swapping out some larger rooms on the top floors into single rooms, and adding eight rooms to the overall project — and hopes to start construction next fall.
“It was always our intention to build there. I think it’s the best location in all of Boston. It’s right in the middle of everything,” said Vincent Cortina, a Somnath Hospitality representative. “It’s a good location for almost any type of traveler — business or tourist.”
While business travel in general has been slow to recover from the pandemic, Boston’s business travel demand has come back stronger than other Northeastern cities, said Romy Bhojwani, director of hospitality market analytics for CoStar Group, who studies the Boston hospitality market.
In October, business demand for luxury and upscale hotels throughout eastern Massachusetts on Mondays through Wednesdays was at 95 percent of its 2019 level — compared to 85 percent recovered in New York and 79 percent in Washington, D.C., CoStar Group data show. For the month, Boston sat behind just two cities — Austin, Texas, and Charlotte, N.C. — in its recovery of business travel demand.
“The recovery is a lot stronger than a lot of other markets in the Northeast, and I think that continues into 2023,” Bhojwani said. “Just given the diversity of demand generators relative to other urban markets — I think Boston will do well.”
However, Colella of Pinnacle Advisory Group noted, there’s still a broader question about ongoing demand for business and corporate travel. With many companies evaluating their return-to-office strategy and hybrid work, they may be wondering whether they need to send workers out traveling at all.
“Having people in offices is directly correlated to their ability to travel for work,” he said.