The economy may be in full retreat, but the Sheraton Springfield has been busy moving forward.

In fact, it’s undergoing a series of renovations — hotel improvements typically have to be done in phases to minimize the disruption to guests — including a remodeled atrium, new carpeting, a lobby makeover, and room renovations, the last of which will occur between Thanksgiving and Easter, when hotel business is typically slowest.

Paul Picknelly, the hotel’s president, calls the project his “Springfield stimulus package” because it has employed local contractors whenever possible for the paint, wallpaper, carpet installation, construction work, and other jobs. “We’re seeing the fruit of the labor by using local talent,” he said. “When all is said and done next year, we’ll have spent about $3.5 million, and we’ll have a bright, shining new hotel.”

What makes that expenditure striking is that it comes at a time when fewer travelers and businesses are spending money on hotels, due to a prolonged recession, leaving owners and general managers across the region wondering how to strike a balance between investing in their properties and riding out the storm.

“Just like any business, we’re feeling the recession right now,” said Phil Santopietro, general manager of the Holiday Inn & Conference Center in Holyoke. “Right now, everyone’s trying to compete with last year’s numbers, and we’re all throwing the budget out the window.

“We’re having to sacrifice on rates to get the occupancy up. It’s very competitive,” he said, noting that the lack of business is due to a number of factors, all recession-related. “It’s corporate business, it’s people not traveling as much, it’s sports teams cutting back,” he said. “We had a kids’ hockey team cancel back in February because they couldn’t afford the trip. Everyone’s seeing it.”

As a result, competition is more frenzied these days, Santopietro said, with area hotels scrambling for an increasingly limited pool of guests. “Everyone’s competing for the same things now. It used to be that a certain hotel competed for a certain business, but not other business. Now, everyone’s going after everything, so you have to be on your game, and adjust your rates every day.”

In this issue, BusinessWest checks into a few area hotels to discover why anxiety is high in the hospitality industry right now — and what strategies hotels are tapping to keep the front-desk bells ringing.

Widespread Concern

The decrease in hotel occupancy isn’t just a regional issue. The national demand for hotel rooms began to decline in the first quarter of 2008, according to Smith Travel Research, which tracks industry trends. Another such organization, PKF Hospitality Research, projects that the cycle will hit its low point in the third quarter of this year before demand begins to slowly rise — emphasis on slowly — once again.

“The good news is that the bottom of the current cycle for the U.S. hotel industry is soon to arrive. The bad news is that 2009 will be the weakest year on record for the domestic lodging industry, and 2010 is going to be disappointing as well. Accordingly, industry participants need to calibrate their expectations when analyzing lodging performance measurements,” said R. Mark Woodworth, PKF president, in an article at Hotel News Now (hotelnewsnow.com). “If you are wondering when we’ll start to see actual growth in room rates and revenues, then you’ll have to wait until 2011.  However, if you want to know when the operating environment is going to get a little less painful, that’s happening right now.”

The immediate pain, however, is sharp. Last month, Moody’s Analytics downgraded its outlook of a 2.9% national employment decline to 3.8%. Given the correlation between employment and lodging demand, the new expectation is for revenue per available room, an industry measuring stick, to decline by 17.5% in 2009, followed by another 3.5% in 2010.

“We’re trying to get through these times without affecting jobs,” said Curt Shumway, chief operating officer of the Hampshire Hospitality Group, a collection of seven hotels in Hadley, Northampton, and Amherst. “We feel like we’re rolling the dice on being optimistic and increasing staffing. We hope to get some momentum that will carry us through the next three or four months, and hopefully by then we’ll be past this.”

Shumway said the proximity of his hotels to the Five Colleges provides some cushion during lean times, but only so much, especially when businesses are all cutting back on events, and families are scaling back travel plans.

But just as critical, he explained, is the drought in federal and state funding to the area’s many nonprofit organizations, which have long been a key source of hotel business in Hampshire County. He said that, after 9/11, he saw a shift toward more regionally based business, but many potential customers are suffering, and declining to book events.

“With funding cut so severely, a lot of these groups, which were already having meetings with coffee and cookies instead of full-fledged dinners, now aren’t having those meetings at all,” he said. “Regional nonprofits have been hurt dramatically.

“Then you get into the gas prices,” he continued, “and everyone’s cutting back on major gatherings and keeping travel to a complete minimum.”

Picknelly noted that hotels aren’t any different than any other business affected by the economy. “Business is off from last year, just like it is in most sectors,” he said.

“A fair amount of the business we deal with Monday through Friday is the corporate and transient customer,” he added, “and when their business is down, and they’ve experienced layoffs, there’s a trickle-down effect, and ultimately the number of rooms we fill are down.”

The Sheraton and the Hilton Garden Inn, another Picknelly property located beside the Basketball Hall of Fame, have created some of their own advantages, he said, forging cross-marketing partnerships with area attractions that offer customers package deals on rooms, tickets, and meals.

“We have Six Flags, we have induction weekend at the Hall of Fame, and certainly the Big E is a huge room generator,” he said. “So for our hotels, those are definite positives, and in my opinion, we’re going to fare much better than the average downtown hotel in New England this summer because of those relationships and marketing opportunities.

“And,” he added, “if we’re helping to get a few more people into the Hall of Fame or increase attendance at the Eastern States Exposition or Six Flags, it’s all good for Western Mass.”

The Holiday Inn in Holyoke also offers a Six Flags package, Santopietro said, as well as a gas package that offers guests a $25 gasoline card and a so-called ‘stimulus package’ that includes $25 to use at Target. “Right now, the gas package is the most popular because gas prices have gone back up,” he said.

Marketing those deals is another challenge. “You have to advertise correctly,” he said. “It’s a daily thing. You can’t sit back anymore — not that we ever did. But you have to be very aggressive now. Every lead is followed. We’re always looking, and we’re thinking positive. We think it’ll keep turning and get better.”

At Your Service

Santopietro said he’s frustrated by consumer and business confidence that seems to turn easily on the words of lawmakers or economic speculators in the media. “It’s all about what the big guys say. If they say things are great, people will spend money. If they say it’s bad, they won’t.”

And when they do spend their money, he said, the goal is to provide the kind of experience that will keep them coming back. “The only way to get more people in the hotel business is with service. It’s all about service. We bend over backwards — we always did, but it’s more important now.”

Of course, price is a major factor, he said, citing the continued success of third-party Web sites like Priceline and Expedia. But he added that guests still want a good experience, no matter what they’re paying. “They’re looking for the best value. And you want them to think of you the next time they pick up the phone.”

Unfortunately, Shumway noted, there’s only so much a hotel can do if people just aren’t traveling as much.

“When everyone’s cutting back, I’m not sure what we can do to bring people to the area,” he said. “It’s a little unrealistic to think one hotel can market to Maine, New York City, New Jersey, Colorado, and get them to come to this area. But when they do come to the area and stay at one of our facilities, we have to hope that our guests leave happy, so they’re not going to look elsewhere when they come back, and will refer a friend, too.”

After all, there are a lot of competitors out there. And right now, none of them like what they see.

Joseph Bednar can be reached at

bednar@businesswest.com