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Area Restaurants Face Challenges as They Try to Fully Recover from COVID

By Contributor
Bill Collins
Restaurants Special Coverage

They Have a Lot on Their Plate

Bill Collins

Bill Collins

One restaurateur called it a ‘triple whammy.’ He was referring to a combination of forces — specifically soaring prices, supply-chain issues, and an ongoing workforce crisis — that are standing in the way of a full bounce back from two years of COVID. Despite these issues, restaurant owners are optimistic that 2022 will bring something approaching normal. Eventually.

By Mark Morris

When 2022 began, Bill Collins was anticipating a full year of uninterrupted business for his restaurant, the Center Square Grill. He did not foresee what he called a “major punch in the face” that shut down the restaurant for six weeks.

In January, one of the thermostats in the restaurant’s dining room failed, causing one sprinkler head to freeze. When the heat came back on, the ice in the line moved and activated the sprinklers. By the time Collins could shut off the sprinklers, the restaurant had taken on nearly 15,000 gallons of water.

“The basement was a nearly complete gut job,” Collins said. “In the dining room, we replaced floors, seating, and several walls.” It took exactly six weeks to go from the flood to opening the doors once again.

Locating a contractor can take six weeks, so how did Collins make the repairs to Center Square and re-open so quickly?

“I looked to my customer base and called the contractors who are regulars at the restaurant,” he said. “They had a vested interest in getting us back open.”

In some ways, the sprinkler incident is a metaphor for the struggle for area restaurants as they look to make a full comeback after the pandemic. Just when people are dining out again and restaurant owners are looking to make up for two years of lost business, they are getting hit with spikes in food costs, increased labor costs — when and if they can find staff, that is — and various supply challenges that affect food and kitchen operations.

“I looked to my customer base and called the contractors who are regulars at the restaurant. They had a vested interest in getting us back open.”

“It’s a triple whammy,” said Ralph Santaniello, co-owner of the Federal Restaurant Group. “In some ways, this has been more challenging than the pandemic.” He quickly admitted that while the pandemic was a crushing event that came out of the blue, governments, communities and vendors all came together to help everyone get through it.

In addition to the Federal in Agawam, Santaniello and partner Michael Presnal own Posto Italian in Longmeadow and Vinted Wine Bar in West Hartford. Following his parents, who were in the restaurant business, Santaniello said he has been in the industry his whole life and has never seen prices as crazy as they are today.

“We used to plan out the business to see where we would be in five years, then it went to five months, and now it feels like it’s five minutes,” Santaniello told BusinessWest.

Everyone we spoke with discussed the challenge of rising costs. Aurelien Telle, co-owner of Alta Restaurant in Lenox, said that even after forecasting for increased costs, they were 6% higher than anticipated in the first quarter alone.

Aurelien Telle, co-owner of Alta Restaurant

Aurelien Telle, co-owner of Alta Restaurant, says price increases on food the past six months have been “insane.”

“That’s huge and we don’t know where it’s going from there,” said Telle. “In the last six months price increases on food have been insane.”  

Adding to the craziness in food costs is unpredictability of what will be affected next.

Andrew Brow, chef and owner of Highbrow Wood Fired Kitchen in Northampton said all restaurants plan their menus with a balance of higher-cost items such as filet mignon and less expensive ones such as pasta. In the past, Brow bought braised short ribs at $5 per pound rather than New York strip steak which costs $10 to 12 a pound. Supplies are so mixed up now, that the short ribs cost as much as the New York strip which hasn’t increased in price.

“There’s no rhyme or reason to the price hikes,” Brow said. “One week mushrooms will triple in price, the next week it’s chicken and spinach.”

 

Food for Thought

Creating different dishes is one way restaurateurs are adjusting to the chaotic, soaring prices. When scallops escalated from $108 for an eight-pound case to $223, Collins created a new dish that included shrimp, which has held a more stable price. Instead of an entrée with six scallops, he offered in its place a shrimp and scallop entrée using three scallops and three shrimp.

“We used to plan out the business to see where we would be in five years, then it went to five months, and now it feels like it’s five minutes.”

“This way we can keep the dining price where it is and still offer delicious fun food that people expect when they come here,” Collins said.

Gas and electric bills are another area where prices are going up with no end in sight. Santaniello explained that restaurants, by design, are energy intensive with usage increasing in the summer.

“We have air conditioning running all day and night in the summer because when it’s 98 degrees and humid outside people expect to be comfortable when they go into a restaurant.”

It’s not surprising that take out containers spiked in price and were difficult to find at the height of the pandemic. Supply-chain issues also affected restaurants in less obvious ways. Santaniello said he needed a part for an oven door, something that would normally take a week to get, if the repair person didn’t already have one in their truck.

“We waited two months for the part,” Santaniello said. “So, we were down an oven for two months, and that’s difficult in a busy kitchen.”

Santaniello and Telle are experiencing busier than normal kitchens because as customers are returning to their respective restaurants, labor shortages have forced both men to cut back on the hours when they are open.

Andrew Brow

Andrew Brow says there has been “no rhyme or reason” to price hikes on food in recent months.

“Business has been great because of the pent-up demand of people wanting to go out to eat,” Santaniello said. “Our biggest issue is keeping up with that demand because we’re still looking for employees.”

Before the pandemic, the Federal operated six days a week. Now, in order to give his staff some time off, they are open only 4 days a week.

“The pandemic exacerbated a problem that our industry already had with finding enough workers,” Santaniello said. Advertising on job search sites such as Indeed and a restaurant specific site called Poach has brought limited results.

“We found our biggest success came from advertising on Facebook.”

For 13 years, Alta was open 7 days a week for lunch and dinner. These days, hours have been reduced to 6 nights a week and lunch hours were cut.

“We reduced our hours because we couldn’t hire more people,” said Telle. “I didn’t want my staff to have to work six double shifts, so I closed lunches to protect our staff.”

Telle is currently interviewing people with the hope of offering lunch hours again by late spring.

“We always get busier as the sun comes out,” he said adding that business also gets a big boost from all the tourists who visit Lenox in the summer.

Collins called it the best investment he’s ever made when he paid his staff their full salary during the six weeks Center Square was closed for repairs.

“It’s so tough to find qualified people that it made sense to us,” Collins said. “Most of my team has been with me for quite a while and it would have been tough to replace them if they had to leave and find other jobs.”

There are signs that open restaurant positions may be starting to get filled. Brow reported that Highbrow is fully staffed and he was able to hire a full staff for his new restaurant Jackalope in downtown Springfield.

“Even though wages are up much higher than pre-pandemic, the workforce is back,” Brow said.

As the weather gets warmer, all the restaurant owners look forward to expanding their outdoor dining. They all expressed gratitude to state and local officials for keeping this lifeline open even after diners were allowed back inside.

“I’m sure there are some people who are not comfortable coming back into a restaurant,” Collins said. “I think we’ll start seeing them once outdoor dining picks up.”

On May 1, Telle began accepting reservations for summer dining at Alta.

“People are making reservations into July and August,” he said. “And 85% of those are requests to sit outdoors.”

Collins added, “fresh air is not going out of style anytime soon.”

Summer also brings with it the opportunity to support local farms. Telle said working with local farms allows him to control some of the price increases, though he understands local prices will be higher this year than in the past.

Collins buys as much local produce as he can. In fact, his menu credits Szawlowski Farms in Hadley with supplying potatoes for their French fries.

“When tomato season kicks in we will buy them from Meadowbrook Farm in East Longmeadow,” Collins said. “Nothing tastes better than fresh local produce.”

 

The Bottom Line

Between outdoor dining and customers who are excited about eating out again, the restaurant owners all remain positive about this year and beyond.

Santaniello, describing himself as an optimist by nature, said, “I’m hoping by the fourth quarter of this year we will see some stability in pricing and as more people return to the workforce it will benefit our industry.”

Telle said he’s hopeful about hiring new staff and looks forward to a busy summer. “Right now, we’re following the same business patterns as a regular year.”

With Jackalope scheduled to open on May 11, Brow expressed gratitude despite all the uncertainty. “For those of us who made it through, it was worth the wait.”

For Collins the year started with closing for six weeks to fix major water damage. Despite that setback, Center Square is still on track to have its busiest year ever. He philosophized that a restaurant experience is more than just food.

“People need to go out and socialize. They need to feel that connection,” Collins said. “When they don’t, they get depressed and grumpy.”

He concluded, “that’s why we’re all back and we’re pumped to be here.”

Palmer Looks to the Future with Optimism

By Contributor
Palmer has a long history as a key train stop
Community Spotlight

Community Spotlight

By Mark Morris

Palmer has a long history as a key train stop

Palmer has a long history as a key train stop, making it an oft-discussed part of conversations about expanded east-west rail.

As the nation recovers from a year of dealing with COVID-19, Palmer Town Manger Ryan McNutt looks to the future with optimism.

While larger cities had to contend with high COVID infection numbers and revenue losses from business taxes, Palmer maintained low infection numbers and relies more on residential taxes, which remained stable.

These days, as many people in the larger metropolitan areas work from home, there is no certainty they will return to five days a week in the office. That dynamic, McNutt believes, gives Palmer a real opportunity. With the average home price in Palmer at $191,000 compared to the Greater Boston area average of more than a half-million dollars, he wants to take advantage of this moment.

“The ability to start a family and work toward the American dream is much more difficult to afford in the Greater Boston area and much easier in our area,” he told BusinessWest. “We may see a change in working conditions where office workers spend up to four days a week at home, which would allow them to live in Western Mass. and take advantage of our affordability.”

McNutt is creating a marketing plan to reach out to the Boston area as well as other densely populated urban areas to promote the value and quality of life available in Palmer and surrounding areas.

“Right now, there are three alternative plans for how the east-west rail will be configured, and Palmer has a stop in each scenario.”

One huge boon for Palmer in this regard would be the proposed east-west rail project. The plan to offer passenger rail service from Pittsfield to Boston has been included in the federal infrastructure plan about to go to Congress. McNutt said east-west rail would be transformative for his town.

“Right now, there are three alternative plans for how the east-west rail will be configured, and Palmer has a stop in each scenario,” he said. Though many steps remain before the plan wins approval and comes to fruition, town planners are looking to identify the right location, and they want to make sure it’s shovel-ready.

“I want to be so ready that, if we were told they could helicopter in a train station and drop it where a site was selected, we want to be ready for that helicopter,” he said.

 

Engine of Opportunity

The economic potential of a train stop in Palmer is not lost on Andrew Surprise, CEO of Quabog Hills Chamber of Commerce. On the job since January, Surprise looks to help chamber members increase their engagement with state and local officials, as well as identify economic programs to benefit the area.

He has already begun working on a grant for downtown Palmer through the Transformative Development Initiative, a MassDevelopment program. The grant provides incentives for businesses to locate in condensed areas, like downtown settings, that are walkable.

“That’s a positive for us because Palmer’s downtown is very walkable,” Surprise said.

He is also applying to the Massachusetts Cultural Council to have downtown Palmer designated as a cultural district. In addition to being a walkable area, a community must show it hosts arts and cultural events on a regular basis.

Surprise admits these projects will take several years to be successful, but the effort would be worth it. “A well-developed and vibrant downtown will help us bring in other businesses.”

Andrew Surprise

Andrew Surprise

“Palmer is well-placed for manufacturing facilities; its access to major highways makes it easy to get products to Boston, Hartford, Albany, and New York City.”

As part of his outreach to local officials, he reminds them of Palmer’s tradition and continued relevance as a manufacturing town.

“There has been a lot of talk on the national level about restoring manufacturing jobs,” he said, adding that communities like Palmer that have plenty of available land could be attractive to Boston-area high-tech companies looking for manufacturing space. “Palmer is well-placed for manufacturing facilities; its access to major highways makes it easy to get products to Boston, Hartford, Albany, and New York City.”

The chamber recently conducted a survey among its members to find out how they weathered the pandemic. Results so far show that two-thirds of businesses have been able to avoid employee layoffs. By finding alternatives such as reducing hours, many avoided having to reduce their staffs.

Palmer at a glance

Year Incorporated: 1775
Population: 13,050
Area: 32 square miles
County: Hampden
Tax Rate, residential and commercial: Palmer, $22.63; Three Rivers, $23.28; Bondsville, $23.67; Thorndike, $23.62
Median Household Income: $41,443
Median Family Income: $49,358
Type of government: Town Manager; Town Council
Largest Employers: Baystate Wing Hospital; Sanderson MacLeod Inc., Camp Ramah of New England; Big Y World Class Market
* Latest information available

“We conducted the survey to learn what types of services the chamber could offer to help businesses find success going forward,” Surprise said, noting that these are only preliminary results, as all surveys have not yet been returned.

As a first step, the chamber is planning a number of seminars for small businesses to help them increase foot traffic and bring in new customers through approaches such as digital marketing.

“Many small businesses are not familiar with digital or social media marketing, and it’s really a necessary tool in the 21st century,” he noted.

 

On the Right Track

McNutt is hopeful some kind of infrastructure package passes Congress because, like municipal leaders all over the country, he faces big projects that need attention.

“There are 47,000 deficient bridges in the U.S., including the nine that are in Palmer,” he said.

But for a small community, he added, taking on a big infrastructure project is a heavy lift, and Palmer has been working with U.S. Rep. Richard Neal to secure funding for at least two bridges, on Main Street and Church Street, which need the most attention.

One project that could add significantly to the town tax revenues involves building 300 seasonal cottages on Forest Lake. McNutt is excited about the potential for this project.

“Folks are coming up from New York to buy our homes because they recognize that living space, fresh air, and not being stuck in small square footage are luxuries that we have here.”

“Right now the cottages are planned for warm-weather use and would bring plenty of folks in to stay in town,” he said. “They will most likely go to local restaurants and make other purchases, so we could see a real economic multiplier effect from this project.”

Palmer has also agreed to be a host community for the cannabis industry. Two retail sites and two cultivation businesses have run into delays to start their enterprises, but McNutt blames COVID for the slowdown.

“The Cannabis Control Commission held fewer meetings than they normally would, and site visits were more difficult to do,” he explained. “In short, everything in the regulatory environment was just harder to do during the pandemic.” He feels confident at least one site will be up and running this year or early in 2022.

As the number of people vaccinated increases and COVID concerns decrease, he believes the opportunity is now for Palmer and surrounding towns.

“Folks are coming up from New York to buy our homes because they recognize that living space, fresh air, and not being stuck in small square footage are luxuries that we have here.”

McNutt noted that people can still pursue the American dream by locating to Palmer because, in addition to its natural surroundings, the town has easy access to metropolitan areas. In short, he said, “we have the best of both worlds.”

Construction Sector Looks Ahead with Optimism

By Contributor
Laurie and John Raymaakers
Construction Special Coverage

Building Momentum

The past year has been an unusual time for the construction industry — one marked by project postponements, soaring prices for materials, and the establishment of strict COVID safety protocols on job sites. But for most builders, it wasn’t a devastating year, and, in many cases, it led to a surprisingly promising 2021. After all, the need for projects to be completed hasn’t gone away, and the backlog is actually creating a surplus of projects to bid on. The aforementioned challenges still remain, contractors say, but the work rolls on.

Laurie and John Raymaakers

Laurie and John Raymaakers say there’s plenty of infrastructure work available — and that trend should continue in the coming years.

 

By Mark Morris

 

For Dan Bradbury, 2020 was “a year of pivoting and finding new ways to get the job done.”

As director of sales and marketing for Associated Builders, Bradbury saw a slowdown at this time last year as several projects that were scheduled to break ground were instead postponed indefinitely.

By including construction as an essential industry, Gov. Charlie Baker allowed job sites to stay open and keep workers employed while following pandemic protocols. While Bradbury appreciated the ability to keep projects moving, other slowdowns were out of his control.

“There are a lot of hurdles to get over in a large industrial or commercial project, and COVID hit the brakes on all of them,” he said, noting in particular the new challenges surrounding what in the past had been routine business with municipal governments.

“We already had some projects scheduled to start this spring, but, more importantly, we’re starting to fill our pipeline again with projects that will take us well into the fall of this year and potentially into 2022 as well.”

“Because municipalities had to move to fully remote meetings, they occurred less often, which made it difficult to get building permits, zoning-board approvals, and the other essential documents we need to start and finish a building project,” Bradbury said, adding that Associated has projects in the works in a number of different sectors. One example is a 30,000-square-foot building in Bloomfield, Conn., where a local chemical company will occupy part of the building and lease the remaining space.

His company’s experience isn’t unique. BusinessWest spoke with several area construction managers to discuss how their industry looks this spring compared to a year ago, when COVID-19 suddenly changed the world — and the main takeaway is one of optimism and promise.

A significant part of Houle Construction’s business involves interior renovations for medical facilities. Company President Tim Pelletier noted that, when COVID first struck, business came to a complete halt as medical professionals were dealing with rapidly increasing numbers of COVID patients. One year later, he’s optimistic about the increase in construction activity.

“It’s absolutely busier than last year,” he said. “We’re seeing more projects taking shape, especially with our hospital clients.” In the meantime, Pelletier has picked up renovation projects at organizations that offer hall rentals, such as the Masonic Temple in East Longmeadow.

“The temple has not been able to host gatherings for the past year, so they are using the downtime to make renovations for when they can open again,” Pelletier said, adding that it’s a way to take advantage of what everyone has gone through and find a positive side.

An aerial view of Worcester South Community High School

An aerial view of Worcester South Community High School, one of the many recent school projects undertaken by Fontaine Brothers.

Bradbury credits pent-up demand for the increase in projects his company has been taking on this year.

“As soon as the calendar page turned to 2021, our phones started ringing,” he said. “We already had some projects scheduled to start this spring, but, more importantly, we’re starting to fill our pipeline again with projects that will take us well into the fall of this year and potentially into 2022 as well.”

Dave Fontaine Jr., vice president of Fontaine Brothers, said his company has been fortunate to have several projects ongoing since before the pandemic hit. Many of his largest projects involve building schools, for which budgets are approved long before breaking ground, so funding for them was not affected by COVID concerns. Since the pandemic hit, Fontaine said some towns have delayed public funding approvals, but not as many as he had anticipated.

“In the last six to eight months, we’ve picked up more than $400 million in new work,” he noted. “Some of these projects are in pre-construction now and will start this summer.”

Among the projects scheduled to begin in June are the $75 million DeBerry-Homer School in Springfield and the $240 million Doherty Memorial High School in Worcester.

Infrastructure construction also experienced steady business last year. J.L. Raymaakers and Sons Construction specializes in installing water and sewer lines as well as site excavation for municipalities, airports, and private companies. After a busy 2019, co-owner John Raymaakers said 2020 was nearly a record year for his company, and he’s on pace to fill up the project list for 2021.

Associated Builders project in Bloomfield, Conn

In this Associated Builders project in Bloomfield, Conn., a local chemical company will occupy part of the building and lease the remaining space.

“It’s amazing the amount of infrastructure work that is out there for bid,” Raymaakers said, explaining that his company subscribes to a register that lists all the new public and private projects available for bid. Since the middle of last year, he has seen no slowdown in the volume of bidding opportunities. “Looking only at our category of construction, there were five to six new projects announced just last week.”

Raymaakers predicted bridge construction, another area of expertise for his company, will also see increased activity.

“In the next few years, I think we are going to see a lot of work on replacing aging bridges in New England,” he said, adding that this should happen even without a federal government infrastructure bill, citing two recent bridge-replacement projects his crews are working on in Stockbridge and Pittsfield. Still, he’s hopeful that some kind of infrastructure legislation passes, saying it would be “a huge boost to us and others in our industry.”

 

Help Wanted

While business activity is brisk for everyone BusinessWest spoke with, they’ve all faced recent challenges; some are unique to doing business in the COVID environment, and others are chronic problems made worse by the virus. The issue of having enough workers was a challenge on both fronts.

“We’ve definitely lost people from the workforce due to COVID concerns,” Fontaine said. “They might be taking care of a family member, or they might be in a group that has underlying health concerns.”

He added that managing COVID on the job site is also difficult. “Anytime someone tests positive for COVID, that individual and anyone in close contact with them has to go home and quarantine for the time period,” he explained. “That can result in a lot of labor disruption on a daily basis.”

COVID also exacerbated the long-running problem of fewer workers in skilled-trade and general-labor jobs. Raymaakers said finding help in construction is a constant challenge. Co-owner Laurie Raymaakers pointed out that heavy-equipment operators and construction laborers can make a good living.

“There’s a misconception that laborers aren’t paid well,” she said. “The pay and benefits at our company are pretty good; the reality is there are just fewer people who want to do this type of work.”

She added that it’s also misleading to suggest laborers are not skilled, pointing out that her company’s laborers are highly skilled at making sure pipes are situated properly and secured to withstand years of service.

“Our workers also put together fire hydrants, which require about 50 bolts that have to be tightened in a certain pattern. Hydrants are under constant water pressure, so if it’s not built correctly, parts of the hydrant will go flying in the air.”

As older craftsmen such as plumbers and electricians continue to retire, their ranks are not being filled by enough younger workers. With projects increasing, Bradbury said an already-competitive labor market gets squeezed even further.

Tim Pelletier, president of Houle Constrution

Tim Pelletier, president of Houle Constrution, at the Masonic Temple in East Longmeadow.

“Between the demand for commercial/industrial as well as residential, everyone in the trades is busy, and they can’t find enough workers,” Bradbury said. “On top of that, solar companies are hiring all the electricians they can find at a time when electricians were already in short supply.”

The biggest hurdle to doing business right now, according to Bradbury, involves managing enormous price increases for materials, in some cases rising by more than 100% compared to this time last year.

“Over a period of months, we’ve seen multiple price increases in steel and lumber products,” he said. “Those two create a trickle up that affects prices for every other building material.”

Bradbury noted that steel manufacturing has been affected by labor outages due to COVID, leading to product-supply shortages. He also pointed to increased demand for lumber, especially on the residential side, where housing starts are booming. In addition, his company and many others receive a great deal of lumber from Canada, where the U.S. still has tariffs in place on lumber.

Bradbury said COVID issues are not affecting project schedules because his firm will not start a job until it has a guarantee that materials are available. “We are also adding cost protections in our contracts as a way to guard against the constant increases in materials.”

It’s too early to determine what immediate impact the pandemic will have on building design, but Bradbury said clients from current and future projects have begun asking about air handling and filtration.

“For sure, air handling and using UV light to sanitize a space are areas where people have been putting more focus,” he said. “I think these requests will continue as there is an increased emphasis on clean air and other ways to keep facilities sanitized.”

At Worcester South Community High School, workers installed air-handling units that use bipolar ionization, or, as Fontaine described it, a system that cleans the air and removes many of the germs and bacteria from the building.

“The motivation to install this system was driven by COVID, but there are other benefits, too,” he said. “Systems like this provide a better environment for people with asthma and other health concerns.”

 

Spring of Hope

The arrival of spring and increased numbers of people receiving COVID vaccines gives all the construction managers we spoke to a sense of optimism about life and getting their projects done.

At press time, asphalt plants in the area had begun to open. Because the plants close for the winter, municipalities will not allow road construction because there is no access to repave the roads. So the plant openings are great news for companies like Raymaakers, which plans its water- and sewer-line projects around those openings.

Other managers look forward to a time when they do not have to socially distance their crews and wear masks all day.

“Masks are another nuisance to deal with,” Pelletier said. “If we can start to get distancing and masks behind us, it will speed things up on the job site.”

As part of planning for future business, Bradbury has begun to ask some fundamental questions about what lies beyond the horizon. “Where is the growth potential going to be as we come out of COVID, and which industries will still want to build and have the money to build?”

As he considers the types of industries that are prevalent in Western Mass. and Northern Conn., such as aerospace and manufacturing, he wonders if government spending will still drive those industries. He has also given some thought to the insurance industry.

“Typically, there has been a huge demand for office space for the insurance industry, and how they address that moving forward is a big question mark coming out of COVID.”

As the insurance industry reconsiders its needs, Bradbury added, there has been a sharp decline in demand for all office space. “We are definitely not building more office space anytime soon.”

But his and other firms are building — and that’s good news after a year of uncertainty and a pandemic that hasn’t yet gone away.

Tourism and Hospitality Industry Optimistic for 2021

By
Gillian Amaral (left) and Stacey Warren
Special Coverage Tourism & Hospitality

Get Back Here

It’s called ‘revenge spending,’ or ‘vacation retaliation’ — the idea that people who were unable able to spend money on travel last year will go all-out this year. Surveys say it’s a palpable sentiment among Americans right now; the question is whether they will actually follow through on those plans, and how safe they’ll feel doing so. When they’re ready, area tourism and hospitality leaders say, Western Mass. will be an ideal destination, boasting the variety of indoor and outdoor experiences and affordability that travelers seek — an ideal answer to all that pent-up demand.

Gillian Amaral (left) and Stacey Warren

Gillian Amaral (left) and Stacey Warren, co-founders of Three Chics Hospitality.

Mary Kay Wydra learned a couple new phrases over the past few months.

“The buzz term is ‘revenge spending,’” the president of the Greater Springfield Convention & Visitors Bureau (GSCVB) said. “That is, ‘I’ll spend more on things I was denied because of COVID.’ Things like in-person entertainment, eating at restaurants next to people, and travel.”

The other buzzword making its way around the tourism industry is ‘vacation retaliation,’ and it means roughly the same thing.

She likes those phrases — or, more accurately, what those sentiments portend. “That bodes well for us as a region,” she told BusinessWest. “We are affordable and easily accessible — a destination with a lot to offer.”

Indeed, while COVID-19 has been far from a positive for the region, it did open many people’s eyes to what Western Mass. has to offer, particularly those who migrated here to escape New York City or Boston at the height of the pandemic. That’s evident in the surging real-estate market, but also in the optimism many in the tourism and hospitality sector are beginning to feel about what lies ahead.

It can be detected in Hampden County’s hotel occupancy, which was 39% in January — down from the 49% recorded a year earlier, but significantly higher than the statewide figure of 29%, and on par with national numbers.

“A great number of people are planning to travel, and Western Mass. is well-positioned to get summer travelers. We have that combination of indoor and outdoor attractions and all this green space for recreation.”

It’s also impacting surveys, like a recent ‘sentiment study’ conducted by American Express that found that 84% of Americans have travel plans in the next six months, the highest figure since the earliest days of the pandemic. And 69% of those intend to take advantage of ‘second-city’ destinations, Wydra noted — in other words, those outside of big cities and top tourist spots.

Places, she said, like Western Mass.

“A great number of people are planning to travel, and Western Mass. is well-positioned to get summer travelers,” she added. “We have that combination of indoor and outdoor attractions and all this green space for recreation.”

One more statistic from the survey: 61% of travelers intend to spend more than normal because they couldn’t go anywhere last year.

That’s music to the ears of Stacey Warren and Gillian Amaral, two veterans of the hospitality industry who recently launched their own enterprise, Three Chics Hospitality, which seeks to market its clients to group-tour operators.

“Our clients are group-friendly restaurants and attractions interested in having motorcoach groups come to their establishments or attractions; we offer consulting and marketing for them,” said Warren, who has worked in the hotel field for 17 years.

She called such connections “vital” to the region. “Every single bus that comes in may need 20 or 25 overnight rooms, then you have 20 to 25 dinners at different restaurants, attraction tickets … one bus is really a big impact on the economy.”

Amaral agreed. “Based on multiple tours we can bring in, the economic impact to the region will be huge,” she said. “And just based on conversations I’ve had with people, they’re ready to travel, they’re ready to get out, but they’re also ready to have someone else do that for them. People are like, ‘I just want to go on a tour; tell me where to go, make it easy for me, and take me there.’ That’s our business model. It just makes sense to be ready when the environment is ready for us.”

That moment isn’t far away, Warren added. “People are ready, and we want to be here to help the restaurants and attractions capture that business while they’re here.”

Jonathan Butler, president and CEO of 1Berkshire, noted in a message to that organization’s members last week that sentiment around travel is starting to turn in a way that promises to benefit Western Mass.

“A year ago at this time, we were headed into two or three months of lockdown where nearly all economic activity ceased. A year later, we’re mostly headed in the other direction,” he said. “Vaccinations are finally beginning to add up, public-health metrics have improved, and statewide capacity and operating restrictions continue to be eased on an almost-weekly basis. Out-of-state travelers from neighboring states are now only subject to travel advisories, and within the next couple weeks, even those should continue to be relaxed.”

Sensing a changing tide, Butler noted, organizations like Tanglewood and Jacob’s Pillow (see story on page 39) both recently announced a return to live performances for the upcoming season, and will be joined by other institutions like Barrington Stage Co., Berkshire Theatre Group, and Shakespeare and Co. in bringing performing arts — and, in turn, visitors — back to the region.

“When you combine this exciting news with the continued momentum of the outdoor recreation economy, and our other major cultural properties operating closer to full capacity — now having a year under their belt in learning how to best operate during this pandemic — 2021 starts to feel far more exciting than a year ago.”

 

Taking the Long View

As director of Sales for Hampton Inn Chicopee/Springfield, as well as president of Hampton Inns of New England, Warren has her finger on the pulse of hospitality in the region, as does Amaral, an assistant professor of Management at Bay Path University who also runs Events by Gillian LLC, specializing in event management and consulting, and whose past event experience includes stints at the Eastern States Exposition, MassMutual Financial Group, Enterprise Rent-A-Car, and the Basketball Hall of Fame.

The third ‘chic’ in their new enterprise’s name is, well, hospitality itself, represented by the image of a pineapple. And they feel like Western Mass. has become more of a household name in tourism and hospitality — with the potential for an even broader reach.

Mary Kay Wydra says Western Mass. is well-positioned

Mary Kay Wydra says Western Mass. is well-positioned to raise its profile in the tourism world.

“A lot of the tour operators that have been bringing groups here would just use this as a stopover because they’re from all over the country, and a lot of them just think of Boston and the Cape,” Warren said. “But they’re starting to think of Western Mass., too, and wanting to do things to add on, to offer new and fun ideas for their clients and keep them coming back.

“There are so many great things they can do right here,” she went on. “We can keep them here for a couple of days and reap the rewards, and have their clients leave here happy and wanting to come back.”

Amaral said the two of them have talked about building a business around this concept for years, and felt like this was the right time — even during a pandemic.

“We felt like there was a need. People would come to the Massachusetts area and always go straight to Boston, but what about us here in Western Mass.?” she asked. “Fast-forward to a pandemic we’re almost out of, and we thought, this is the time for us to be positioned for the influx of travel that will come with group tours.”

With their deep knowledge of the region’s tourism industry, she added, they’re able to craft itineraries tour operators can sell to clients, and it’s not too soon to start making those connections, even when the economy isn’t fully opened up.

“Every single bus that comes in may need 20 or 25 overnight rooms, then you have 20 to 25 dinners at different restaurants, attraction tickets … one bus is really a big impact on the economy.”

“Everyone is poised and ready at this point to just go — let’s hit the switch and move forward,” Amaral said. “That’s why now is the time to launch, versus in July, when things are opening up and people are feeling comfortable. At that point, you’re behind.”

Wydra agreed, noting that statistic about 84% of Americans with travel plans in the near future. “People are creating destination wish lists, and simply having a future trip planned makes people happy. We’re optimistic people are going to visit this year. We pushed pause on marketing last year, but hope to start spending again.”

She said the meeting and convention business will be slower to return, simply because large events are often planned years in advance, and an organization that cancels an event here may not be able to return for a few years. Last year, 164 groups canceled or postponed events in the region, with an estimated economic impact of $97 million going unrealized. However, about half those who canceled plan to come back in a future year, she added.

In the meantime, the GSCVB is engaging in some creative sales pitches for the region by planning virtual site visits at destinations like the Amazing World of Dr. Seuss Museum, MGM Springfield, and the Basketball Hall of Fame.

“We’re showcasing the attractions because these attractions set us apart,” she said, adding that the bureau is equally intent on highlighting the many different meeting spaces available. “We want to make sure Western Mass., as a brand, stays out there in front of meeting planners.”

Lindsey Schmid, vice president of Tourism & Marketing for 1Berkshire, recently told Berkshire Magazine about a multi-pronged marketing approach, promoting all there is to do virtually in the Berkshires, as well as continuing to feed travelers ideas and imagery that will inspire them to plan a Berkshire getaway now and more extensive travel later. Part of that message is the outdoor recreation opportunities that helped the region’s tourism sector stay afloat last summer.

It’s a widely understood selling point; U.S. News & World Report’s recent “Best States” feature ranked Massachusetts the ninth-best state in which to live, based on eight factors ranging from healthcare and education to public safely. In the category of natural environment, the Commonwealth ranked fourth.

“Our region leans on the combination of natural beauty and cultural offerings that serve as anchors to drive economic activity; right now, those anchors are preparing for big things in the summer of 2021,” Butler noted.

He added that “the pandemic has tempted us all to lean on pessimism when thinking about the future, but the progressing conditions around us truly call for more cautious optimism. We shouldn’t be so naïve as to think that the summer of 2021 will mark a return to pre-pandemic activity, but we should absolutely be preparing ourselves for a far more robust season than a year ago.”

 

Up in the Air

Certainly, optimism is in the air, although it’s still mixed with some uncertainty. Gathering limits are still a thing, most live performances remain firmly lodged in the future, and some attractions have given no definitive answers on when they’ll open, and to what extent.

For instance, Six Flags New England held a large hiring event last month to fill 3,000 seasonal positions, but the company has issued no definite opening date yet — though it is expected to decide soon, looking to state guidance and the realities of its own business model.

It will do so with heavily publicized safety protocols, like every other tourist destination — an element of the sector Wydra is particularly proud of.

“We’re climbing out of this with precautions still in place,” she said. “I’m very proud of our attractions, with all the protocols put in place, the cleaning and everything else they’re doing to keep visitors safe. You’ll see a lot of that continue.”

Warren said visitors will want to feel safe before the sector really opens up. “There are still some people who are nervous, but we’re able to show them what we can do — what plans the restaurants and attractions have in place to keep them safe when they come — and that’s making them feel very comfortable and ready to visit.”

Amaral cited research showing that people are more comfortable and apt to travel when adequate protocols are in place.

“Being knowledgeable about what to expect ahead of time puts them at ease,” she added. “And, of course, so many people being vaccinated is helping as well. The apprehension, even from six months ago, is much different than it is now. People are just ready to go — with caution, but nonetheless, they’re saying, ‘let’s go.’”

Wydra agreed. “There’s definitely some optimism as we move forward with the vaccines. We’re always hearing about new ones being introduced, and the government keeps making people eligible for it — that’s great news.”

Butler tempered that optimism with the other side of pandemic reality — which is, we’re not out of it yet, and people shouldn’t just abandon the common-sense behaviors that keep case counts down.

“Any increase in business needs to be done with public health and safety as the foremost consideration,” he said. “But all of the larger-picture conditions that have fueled growing visitor and economic activity throughout the past two decades are aligning well.”

Warren has been in the hospitality field long enough to ride a few economic cycles, but she’s never witnessed anything like last year — “and I never want to see it again,” she said. “I’ve never had to cancel so many groups and lose literally millions of dollars in revenue. So I’m looking forward to coming back strong this year and help everyone to bounce back.”

She’s heard from tour operators that they do, indeed, want to come back. But they’ll be returning to a changed tourist economy, and change isn’t always a bad thing, Amaral said.

“This has been a wake-up call to most businesses to think differently, which is exciting to me. Let’s not wait for a pandemic or tragedy to happen to think about a different way to do business or attract a target market or a different product line. If there’s anything we can take from this, it’s don’t get into the same rut. Think about different ways to improve your business.”

Amid the changes, of course, some normalcy is more than welcome.

“Who would have thought, a year ago, that we couldn’t go into a bar and have a drink?” Wydra said. “I want to meet friends after work for drinks. And I’m excited, because I think we’ve got some positive stuff happening in the future.”

 

Joseph Bednar can be reached at [email protected]

No Sure Bets

By
Cover Story

But MGM Springfield Leader Optimistic About the Next Chapter

Chris Kelley had just arrived in Springfield and was still getting acclimated to the region when the COVID-19 pandemic arrived almost exactly a year ago.

Then, he had to get acclimated to something else — something no one in the casino industry had ever seen or been forced to endure before.

“These facilities just weren’t meant to be closed,” said Kelley, president of MGM Resorts’ Northeast Group, which includes MGM Springfield. But they were, of course — for four long, brutal months, before finally reopening in July, but only at one-third capacity and with a number of restrictions in place. Later, the state’s casinos had to reduce hours and close at 10 p.m. as a late-year surge in cases moved the goalposts again.

Now, some restrictions are being eased, and later this month, the state will enter what is known as step 1 of phase 4, prompting Kelley to glance toward the future with optimism in his voice. But in all ways, and by all accounts, the ‘ramping-up’ period for MGM Springfield — the one we all heard so much about in the months before COVID dramatically changed the landscape — has been turned on its ear.

“People are just really excited to be part of bringing downtown West Springfield back.”

In some ways, it will be like starting over for this operation, which recently reopened its hotel for weekends and also its sports bar, and is waiting with what can only be called bated breath to see if and to what degree patrons will return to the blackjack tables, slot machines, bars, and, eventually (but no one really knows when) large-scale events like concerts, shows, and fundraising galas.

In a wide-ranging interview, Kelley, who has remained mostly quiet, from a press perspective, since arriving in this region, talked with BusinessWest about the past year, but mostly about what comes next for this highly visible, nearly $1 billion business that opened to great expectations 32 months ago.

That look back was understandably painful, although he said the past year has certainly been a somewhat beneficial learning experience on many levels (more on that later) and a time when changes coming to the industry were greatly accelerated.

As for the future … it is obviously clouded by question marks that involve everything from how much pent-up demand there will be for everything a casino has to offer, to the fate of sports gambling in the Bay State.

Chris Kelley says, it feels like starting over

In some ways, Chris Kelley says, it feels like starting over at MGM Springfield.

Kelley is optimistic about both.

He said Las Vegas has recently returned to its 24/7 character and something rapidly approaching conditions that existed pre-COVID — and the early indications are certainly positive.

“With vaccine distribution ramping up around the country, there’s good reason for cautious optimism as we look at our ability to gather in larger numbers, and for our industry, in the broader sense, to see improvement as opposed what it was experiencing only a few months ago. As we look at the calendar year 2021, I think we see significant opportunities for improvement, especially as we move into the second half of the year.”

As for sports betting, he said several bills are in various stages of talk and progression through the Legislature, and he’s optimistic that the state will ultimately pass one, especially with other states already doing so, with revenue flowing to them as a result. More important than simply approving a bill, though, is passing legislation that will enable the state to effectively compete and ultimately become an industry leader in this realm. Such a bill might bring $50 million in additional tax revenues to the state annually, he projected.

“We’re looking for Massachusetts to be able to compete with all of the surrounding states that have or soon will have sports betting,” he said, noting that Connecticut will soon be in that category. “A level playing field for MGM and the other casinos in the state is very important, as is giving our customers an amenity, and an experience, that they’ve been asking for now for years.”

 

Doubling Down

Reflecting on the past year, what it was like, and even what he’s learned as a manager, Kelley started by flashing back to what were the darkest of days — when the casino was closed and there was no indication of when it might open again.

“It’s a very uncomfortable experience to walk through these facilities when they’re dark and there’s no activity and action — the sights and sounds that ultimately drew us all into this industry,” he told BusinessWest, noting, again, that once a casino cuts the proverbial grand-opening ribbon, its doors are never locked.

The fact that they had to be locked was just the first in a string of unprecedented steps that defined the next several months, from the shuttering of the hotel and restaurants to the cancellation of scores of events that were on the books, to ultimately laying off two-thirds of the employees working at the casino before the pandemic arrived.

Overall, Kelley said, this has been a humbling experience in some ways — a challenging time, to be sure, but also a learning experience and an opportunity to accelerate, out of necessity, some changes that were coming to the industry anyway.

“No business model for any company will be exactly the same, post-COVID,” he explained. “We have innovated along the way, adopting best practices, and many of those will remain, to the benefit of the guests,” he told BusinessWest. “Digital innovations are an area I would point to; MGM Resorts and MGM Springfield were already headed toward many digital innovations pre-COVID, but the pandemic really accelerated the implementation of those efforts — things like digital menus, the use of QR codes, mobile check-in, and digital keys; those things will remain, and those are a positive part of the guest experience today and moving forward.”

Elaborating on what was learned and how the casino and its staff responded to the rapidly changing landscape, Kelley said some valuable experience was gained that should benefit his team moving forward, especially when it comes to — here’s that word again — pivoting.

“We want to make it more walkable, more friendly, and more inviting so we can complement the business investment that’s happening there.”

“When the pandemic hit, it was a huge learning experience for everyone in this industry,” he said. “We all had to create new ways of operating and coping with restrictions that we had never experienced before. We put an emphasis on internal communications and external communications with our guests, and we found ways to stay in contact with our teams virtually. And through this process, we’ve been working hand-in-hand with our state and local officials and our community partners to weather this experience with the strength and support of each other. That ability to come together as a community during times like this is the silver lining to a very difficult period.

“As a team, we recently discussed the importance of leadership agility,” he went on, “because we have had to learn how to be very nimble and adjust to ever-changing conditions, which I believe will ultimately benefit the business in coming out of all this.”

Barriers at the gaming tables and social-distancing reminders have been facts of life

Barriers at the gaming tables and social-distancing reminders have been facts of life during the pandemic at MGM Springfield.

In recent months, business — and gross gaming revenues — have steadily improved, said Kelley, and this has been while the hotel and some restaurants have been closed. Looking forward, he expects this trend to continue and for there to be a good amount of pent-up demand for casino-style entertainment.

“It remains to be seen what the reaction of our communities will be to a vaccinated population, but we’re optimistic that we’ll see the return of guests to our property,” he said. “We had seen resiliency even during this time.”

The hotel reopened on a limited basis the first weekend in March, he went on, with the goal being to gauge guest demand and comfort levels and then adjust the business model accordingly. He said initial bookings have been positive, and he expects improvement to come gradually.

As for events in the casino’s various venues — gatherings have brought people and energy to the downtown area and business to a number of hospitality-related ventures — Kelley said it is too early to know when this aspect can resume.

“Ultimately, that will be up to the state to determine,” he noted. “What we can do is make sure that we’re as prepared as possible for that day; we do discuss those things frequently, and we’re actively engaged in planning for the return of those amenities.”

 

Plenty of Wild Cards

Speaking of being prepared … this is exactly what the casino is striving to do when it comes to another key focal point moving forward — sports betting.

New Hampshire became the 16th state to legalize such betting (there are now 22) in July 2019, and officially went live in late December that year. Meanwhile, Connecticut has taken huge steps in this direction, although some complicated negotiations remain between the many parties involved when it comes to where venues will be located, how many there will be, and who will operate them.

As for the Bay State, Kelley counts himself among those who believe it’s a question of when — not if — sports betting gets the green light, and he obviously considers that step pivotal if the state’s casinos are going to going to tap the full potential of what has long been considered an attractive market.

But he stressed repeatedly that his focus is not simply on working with state legislators to pass a bill, but to create a playing field on which the state’s casino can effectively compete. And this is the consistent message he and others with MGM have been delivering to state officials.

“We’re encouraged by the number of sports-betting bills that have already been introduced, and each of the bills that has been drafted has been tailored to the unique interests of the sponsor,” he explained. “So we’ve been focused on advising lawmakers on what our experience has shown us.”

Elaborating, he said this experience has shown that the lower the tax rates are on sports-gambling revenues, the better one’s odds are of effectively competing against what he called the “illegal markets,” and also against the growing number of neighboring states already in or soon to get in this game.

“We want to create a competitive operating model, and so a tax rate that is on the lower side is helpful in creating the best payouts for the guests, and also helpful in competing against the illegal markets, and it’s helpful in competing against border states,” he went on. “And we believe that, ultimately, it creates the best guest experience as well.”

He said the casino has a plan in place and has the ability to move “very quickly” when state legislators decide to pull the trigger.

“We’ve spent a lot of time looking at the property and where a sports book makes sense, and also at how to create an experience that would really be a market leader and that will benefit the community at the same time,” he explained, adding that there is a good deal of experience in this realm within the MGM corporation that he and his team can benefit from. “We’ll have many resources to draw upon, and we’re excited about that.”

Reflecting again on those dark times that coincided with his arrival in Springfield, Kelley said those memories linger, even as many can see that proverbial light at the end of the tunnel. And they make him appreciate a return to something ‘normal’ even more.

“To see us moving back in the direction of offering those positive moments, those positive milestones, those positive experiences for our guests, is extraordinarily gratifying, and part of what I love about this business,” he said, adding, again, that while question marks still dominate the landscape, he remains optimistic about not only turning back the clock to pre-COVID levels of revenue and progress, but setting the bar higher.

Ultimately, this story is still in the early chapters, he told BusinessWest, and the ones to come will hold plenty of intrigue.

 

George O’Brien can be reached at [email protected]

Banks Stay Optimistic During an Unusual Year for Commercial Loans

By
Chuck Leach, president and CEO of Lee Bank.
Banking and Financial Services Coronavirus Special Coverage

Lending Support

Chuck Leach, president and CEO of Lee Bank.

Chuck Leach, president and CEO of Lee Bank.

Community banks love commercial lending, Chuck Leach says.

“It’s just good business for us — Main Street lending, that’s where we can have a nice give and take with customers. It’s kind of our wheelhouse.”

That’s all still true, even though 2020 has rocked that wheelhouse in unexpected ways.

“We’re not seeing the same commercial demand,” said Leach, president and CEO of Lee Bank. “It’s either risk aversion or businesses are waiting to see what happens.”

Or, in some cases, they’re extra liquid after taking advantage of the Paycheck Protection Program (PPP) and other stimulus measures, as well as deferring payments on other bank loans, he added. “Put all that together, and they may not have borrowing needs right now, or they’re sitting on their liquidity until they see some clarity with the pandemic or the election or both.”

Clarity has been in short supply since the COVID-19 pandemic forced a widespread economic shutdown at the start of spring that continues to wreak havoc.

Michael Oleksak remembers the first few months of the year, of hearing occasional news about the novel coronavirus back in January, and much more of it as February crept along.

“I’d been asking myself for years, ‘what are we missing? What’s next?’ Because there had to be a ‘next.’ Who would have thought it would be a pandemic?”

“Then, from mid-March into April, everything was a blur. It just spiraled,” said Oleksak, executive vice president, senior lender, and chief credit officer for PeoplesBank, before discussing the PPP surge and other measures that followed (more on that later).

Blurring the picture further was the very uncertainty of what was coming. Having experienced several economic upheavals, from the bank failures of the early ’90s to the bursting of the dot-com bubble in 2000 and 2001, to the housing crisis in 2007 and 2008, he had no idea what the next crisis would be.

“I’d been asking myself for years, ‘what are we missing? What’s next?’ Because there had to be a ‘next.’ Who would have thought it would be a pandemic?

“This will be the fourth economic cycle I’ve been through, and every one has been different,” he added. “And this one is far different than the others. We’re not seeing a lot of new activity. I think everyone is kind of hunkered down, for lack of a better word, in survival mode.”

As Allen Miles, executive vice president at Westfield Bank, put it, “obviously this one was a lot different. You couldn’t see the train wreck coming; that’s the best way to explain it. It just got dropped on us.”

What happened next in commercial lending is an oft-told story recently, but one worth telling again. What will happen next … well, no one really knows. But banks will certainly take lessons from a challenging past seven months as that story takes shape.

 

Lending a Hand

Miles said Westfield Bank started reaching out to loan customers in February when coronavirus became a more widely reported issue. In mid-March, like other banks, it was actively sending employees home. And then the storm hit.

From mid-March into the start of April, “that two weeks was absolutely crazy because you had people looking for loan deferrals, and the bank examiners were very friendly to both the banks and borrowers to try to help these people out,” he recalled. “We were just trying to help our customers. You’re not worried about loan origination; you’re just worried about getting people through the unknown and the craziness.”

Michael Oleksak says new lending activity has been down

Michael Oleksak says new lending activity has been down because many businesses are “in survival mode.”

The first Monday in April, the bank received about 500 PPP applications, and about the same number the next day.

“We needed to get all hands on deck,” Miles told BusinessWest. “We were still waiting on guidance from regulators and the Treasury Department. We had people afraid for their livelihoods, their families, and everything. It was organized chaos.”

The bank got $185 million in PPP loans approved in that first round, what he called a “herculean task.” The second round, several weeks later, was much less chaotic. “That was more for the smaller businesses — a lot more applications, but smaller in dollar size. We were able to keep up with those because we’d been through it, and they weren’t as complicated.”

Oleksak said the PPP was a critical lifeline for a lot of people. “There was kind of a mass panic there wouldn’t be a round two, which put a lot of pressure on the banks and our customers, trying to rush to get them into a program that was not very well-defined from the outset,” he recalled. “Then round two came along, and everyone who needed funds was able to access them, and that made a big difference.”

Leach said the widely reported chaos was quite real, but the larger story was a positive one.

“For now, this has put a lot of capital in the banks and a lot of capital in businesses in our region and beyond. A lot of our customers are in good shape right now.”

“In spite of the controversy, and the people who thought they were making up the rules as they went along, I think the PPP was very functional,” he said. “We’re seeing a lot of customers well-capitalized right now, which is the untold story nationally.

“Maybe that changes and this is just a Band-Aid,” he added, due to the lack of clarity about the next few months, from fears of a second COVID-19 surge to the limbo status of further federal stimulus. “But, for now, this has put a lot of capital in the banks and a lot of capital in businesses in our region and beyond. A lot of our customers are in good shape right now.”

Lee Bank processed 348 PPP loans and has submitted more than 100 forgiveness applications, although some customers are waiting to see if the federal forgiveness guidelines change, specifically whether “they do a sweeping approach where everything under $150,000 is forgiven with a very, very simple forgiveness application.”

Again, borrowers want clarity. Still, Leach came back to the positive impact his bank was able to make with the PPP — and also with loan-payment deferrals for about 240 customers, with about $60 million deferred in total. “In a bank that has $400 million in total assets, you can see that’s a good chunk,” he said, adding that only a fraction of those customers requested a second deferral period.

Oleksak and Miles both reported similar trends, with requests for continued deferrals dropping after the first 90-day period.

“Thirty days before the first deferment was up, we contacted people, and 85% to 90% said, ‘we’re good, we’re not going to be looking for a deferral going forward.’ So that made us feel really comfortable,” Miles said. “With the PPP and the deferrals, it bridged the gap for customers.”

“We’re being very sensitive,” added Kevin O’Connor, Westfield Bank’s executive vice president and chief banking officer. “We’ve been very involved with them, understanding their needs and how the bank can work with them.”

While borrowers in the broad hospitality sector continue to struggle, for obvious reasons, most customers have come through the past seven months well with the help of PPP and loan-payment deferrals, Miles added. “The main ones hurting are the ones being affected by the phases and the rollouts — restaurants, bars. They’ll take a while to get back on their feet.”

 

Starts and Stops

That’s true in the Berkshires as well, Leach said, and restaurants in particular are worried about the onset of cold weather and an inability to seat more customers, due to both the state’s indoor-capacity restrictions and the reluctance among some patrons to eat inside restaurants right now.

But the region’s hospitality businesses have benefited in others ways during the pandemic; in fact, one bed-and-breakfast he spoke with did record business this summer.

Allen Miles says some loan customers are doing well

Allen Miles says some loan customers are doing well, while others, particularly in hospitality, continue to struggle.

“People left urban areas for a safer place, whether for weekends or longer,” he said, adding that some secondary homes became primary homes, while other people bought first homes in an area they felt was safer than, say, New York City. “Interest rates are obviously really low, but there’s also the fear factor of ‘wait, I’ve got to get out of this urban area.’ So there’s been a huge sense of urgency to buy in an area like the Berkshires.”

Unlike some lending institutions, Westfield Bank has seen healthy activity in loan originations recently, Miles said.

“The deferments and PPP money actually made some people stronger because it’s been cash preservation instead of cash burn,” he noted. “Usually for commercial lending, it starts getting busy after Labor Day. We weren’t sure if we were going to see that cycle again, but now it’s quite busy, and people are active. So that’s a really good sign.”

That activity is strong across the board, particularly in commercial real estate, where customers are refinancing for a lower rate or selling, he explained. “It’s a great time to sell — low interest rates, lower cap rates, people are going to pay you more for the property — so you’re seeing a lot of transactions going on right now.”

Commercial and industrial (C&I) loans are healthy as well, he said, adding, of course, that, “with anything related to hospitality or travel, the jury’s still out on that. The longer this [pandemic] hangs over us, the longer the recovery for them.”

At PeoplesBank, Oleksak said, many customers have been accumulating cash and paying down lines of credit, or shopping around to lock in better long-term rates on loans, which is a challenge for banks already facing flattened yield curves. “I think the depth of the crisis is a little bit masked by the amount of stimulus money in the market, from PPP, SBA programs, and deferments.

“The deferments and PPP money actually made some people stronger because it’s been cash preservation instead of cash burn.”

“Some individuals out there are suffering mightily, particularly restaurants and hospitality,” he added. “The other great unknown is, we don’t have a vaccine yet. Are we going to see another spike? People are trying to get back to normal here, but I’m not sure what the new normal is going to look like.”

He pointed to his own institution as an example. Between half and two-thirds of PeoplesBank employees are still working remotely, a trend being reflected across all geographic regions and business sectors.

As a result, “nobody really knows what’s going to happen with the office segment of the market, with so many people working from home. Will they go back at some point? Will companies decide they don’t need so much space, or does social distancing mean you have fewer people but still need more space? It’s a total unknown for us.”

It’s unfortunate that some industries, like restaurants, will likely see a slower return to health, O’Connor said, “but it’s good to see customer confidence in some areas coming back, even a little bit sooner than we would have expected.”

Miles agreed. “We’re very happy with what we’re seeing right now. It’s not behind us, but it’s not as bad as people anticipated. If activity is picking up and people are borrowing, they’re confident, which is good.”

 

Joseph Bednar can be reached at [email protected]

Economic Outlook 2020

By
Cover Story

History indicates a recession, but most just aren’t seeing evidence of one

‘Optimistic skepticism.’ That’s the phrase one area bank president summoned as he talked about the year ahead and, more specifically, talk of a recession. While history — especially as it relates to the inverted yield curve — tells us one is very likely, most all other indicators, from unemployment and inflation rates to the stock market to the steady pipeline of work on the books at area construction-related firms we spoke with, say something else.

It was the Monday before Christmas. John Raymaakers II wasn’t planning on being in that day, but an important bid was due, and he had to wrap up the paperwork.

There were a lot of bids to vie for in 2019, Raymaakers, a principal with Westfield-based general contractor J.L. Raymaakers & Sons Inc., told BusinessWest, noting that the company prevailed in several of these competitions, success that translated into one of the company’s better years recently.

And it’s a trend he expects will continue into 2020.

“We’re still busy at this time of year, and that’s a good thing for us,” he said, noting that the firm specializes in heavy civil construction work such as water, sewer, and drainage systems. “And we’ve got jobs we’re bidding on — one today and another next week. We have a good amount of work in front of us, so we’re feeling pretty good.”

Raymaakers is not alone when it comes to a generally positive outlook for the year ahead. Indeed, BusinessWest talked with several business owners, including many in the construction sector — usually a highly accurate barometer of the overall economy — to get a feel for what might be in store as a new decade dawns.

Slicing through the various comments, it appears there is some uncertainty about the year ahead, which is natural given the considerable talk about a recession, the fact that is a presidential election year, and the ongoing workforce issues facing virtually every sector of the economy.

But there was also something approaching consensus that the generally good times that prevailed in 2019 — and for the past several years, for that matter — will continue in the year ahead.

Tom Senecal, president and CEO of Holyoke-based PeoplesBank, told BusinessWest that, while some indicators may give pause for concern, such as an inverted yield curve (more on that later), most would indicate there is little trouble on the immediate horizon.

“The economy is doing really well,” he said. “We see that in our numbers — from our loan perspective, with delinquency rates … everything is humming along.”

Curtis Edgin, a principal with the Chicopee-based architecture firm Caolo & Bieniek, sounded a similar tone when asked what he’s seeing and hearing.

Tom Senecal says he believes in history and the power of the inverted yield curve to forecast recessions. But his eyes prompt him to be ‘optimistically skeptical’ about a downturn.

“No one’s seen any signs of it letting up,” he said of an expansion that has lasted a full decade now, adding quickly that he’s seen enough economic cycles to know that things can change quickly. He just hasn’t seen any evidence that they will.

Meanwhile, Scott Keiter, a principal with Northampton-based Keiter Builders, said his firm had a record year in 2019. He quickly qualified that by saying the business, only 11 years old, has grown every year since its inception and 2019 was merely the latest in a succession of ‘record years.’

That said, the company, like others we spoke with, has a solid flow of work that will keep it busy well into the new year, with more projects on the horizon.

“Most of our work is institutional and commercial, but we also saw a significant increase in larger residential projects, and I think that’s a good sign — people are willing to invest significant amounts of money in their properties” he said. “And we have a good, secured pipeline for the spring and early summer, and that’s not always the case.”

But, while general optimism prevails, there are challenges facing business owners and managers, especially when it comes to workforce issues, specifically finding and retaining talent.

Indeed, what was once considered a good problem to have — and some still use that phrase because it generally means business is good — is now considered to be just a problem. A nagging problem.

“My membership would say, to a company, that the biggest barrier they have to increased growth is finding more people and finding the right people to expand the workforce and take on additional work that’s out there,” said Rick Sullivan, president of the Economic Development Council (EDC) of Western Mass. “The biggest problem we’re facing is workforce — finding talent, developing talent, and retaining talent — and that’s across all levels, from entry level to middle and upper management.”

For this issue and its focus on the 2020 Economic Outlook, BusinessWest talked with several business and economic-development leaders about what to expect in the year ahead. While no one has a crystal ball, most say their eyes tell them the decade-long expansion could certainly continue into the next decade.

Work in the Pipeline

Senecal told BusinessWest he was giving a speech a few months back, and while talking about the economy in general, he referenced the inverted yield curve and its historical significance.

“Every time a yield curve has gone inverted or flat in the past 50 years, and there have been seven times, in every single case it has indicated a recession, usually about nine months after the yield curve gets inverted,” he said, summarizing his remarks. “Which would indicate a recession around May or June of 2020; that’s what history tells us.

“But when you look at our economic numbers — extremely low unemployment, inflation in check, economic growth being wonderful, the stock market doing wonderful … I’m not a predictor, but indications don’t feel the same as they have over the past 50 years,” he went on. “If you’re a believer in historical data as a predictor of future performance, then the numbers say a recession should come in May or June. But I just don’t see it. I am a believer in history, and I am a believer in data, but let’s just say that I’m optimistically skeptical when it comes to a recession.”

There are a many reasons to be optimistically skeptical when it comes to a recession, especially when talking with those in construction-related businesses, which, as noted, provide an historically accurate barometer of what’s happening with the economy.

That’s especially true of architects, who usually feel the effects of a downturn before almost anyone else. Edgin, who, as noted, has been through a number of ups and downs in the economic cycle in his 35-year career, said he hasn’t seen anything to indicate the economy is slowing to any great degree.

His firm handles both public- and private-sector work, and especially the former. Edgin said this diversity has helped it ride out the slow times. The firm has completed much of its work involving an $85 million elementary-school project in Easthampton and doesn’t have anything approaching that scale in the pipeline. But there is work in the pipeline.

Scott Keiter says his construction business has a solid pipeline of work heading into 2020, a sign of a generally sound economy.

“We’re busy,” said Edgin, using a word that most in the construction field would certainly like to hear him use. “We’re seeing a significant number of studies for projects like senior centers, town halls, libraries, or police stations — people recognize the need; they just need to get their ducks aligned to keep things moving.”

Meanwhile, his firm is handling a handful of smaller projects, including work at the Boys & Girls Club in West Springfield, Westfield State University, and other institutions, as well as some private-sector projects.

Summing things up, he said the company is “catching our breath” after a solid 2019 punctuated by the Easthampton project and waiting for some of those projects in the study phase — and there are quite a few of them — to come to fruition.

“Maybe that’s the adjustment,” he told BusinessWest. “And if that’s all the adjustment we need, I’m happy with that; we were oversubscribed, let me put it that way, in 2018 and 2019.”

This past year was also a busy one for Keiter Builders, which, as noted, had a number of projects on both the residential and commercial sides of the ledger. The latter category included a good deal of work at both Smith College and Amherst College, while the former featured several new homes and a number of large-scale renovation projects.

Summing up what he’s heard from clients in both realms concerning the economy and the year ahead, he said it’s mostly upbeat.

“The people sending the money our way … it’s generally positive,” he noted. “We’re not hearing anything from them that’s concerning — it’s just your normal chatter. People are steaming forward; they’re investing in infrastructure and capital projects. And that’s good news for us.”

Raymaakers concurred. He said 2019 was a busy year — he said it was a ‘9,’ maybe a ‘9½’ on a scale of 1 to 10 — that featured several large-scale projects, including runway-grading work at Barnes Municipal Airport in Westfield and dam repair at Forest Park. Work was so steady, the company added employees, bringing the total to 39.

John Raymaakers, seen here with his wife and business partner, Laurie, says the company is feeling “pretty good” about 2020 and the economy in general.

Looking ahead, he told BusinessWest the firm remains optimistic.

“We’ll see how the election goes, and after that … who knows?” he said. “Right now, we feel pretty good about things.”

Work in Progress

Those comments sum up how most people feel about almost everything except the workforce challenges facing them.

Raymaakers said his company did bring on more people, but finding them wasn’t easy. Keiter said his firm also struggled to find people to handle its growing workload.

And Senecal confirmed that the problem extends to positions at all rungs of the hiring ladder. To put the matter in perspective, he talked about a position the bank has been trying to fill — unsuccessfully — for half a year now.

“We’ve been looking for someone for more than six months in our Accounting department, someone with five to 10 years of experience in the banking industry,” he noted. “And what’s more surprising is that, with all the consolidation going on in this industry, we’re still not able to find someone for that position.

“Overall, it is very difficult to find people right now for many of the jobs where we’re looking for specific skills — it’s virtually impossible in some areas,” he went on. “It’s been such a challenge, and that’s a clear indication of what’s happening in many sectors.”

Indeed, the problem is prevalent in pretty much every sector of the economy, said Sullivan, noting that it is manifesting itself in a number of ways.

One is some upward movement on wages and benefits, which is yet another sign of a healthy economy, he said, adding that, while this isn’t happening across the board, there is movement in many sectors where there is steep competition for talent, especially precision manufacturing and financial services.

“People have choices when it comes to where they can work,” he told BusinessWest. “People are looking around, so in order to keep a workforce, people are having to pay a little more and provide some other benefits or incentives.”

In addition to movement on wages, there is a greater focus on trying to bring more people into the workforce, said Sullivan, noting that, through a grant from the Boston Federal Reserve and the Working Cities Initiative, the region has launched efforts to bring some of those who have been on the outside looking in when it comes to the workforce into the fold.

These endeavors involve mostly entry-level positions, and they’re a relatively new point of emphasis for the EDC, he said, adding that they are generating some results, putting those who have been unemployed or underemployed not just into jobs but onto career paths.

Meanwhile, the EDC is looking at taking steps to bolster the workforce, including what could be called recruiting efforts — steps to market Western Mass. and its many benefits in the hope that some may seek to relocate.

“This might involve some regional advertising initiative — an effort to raise awareness about Western Mass. and how it’s a great place to live, there are opportunities here, the cost of living is lower than many other areas of the state and the country,” he explained. “And while it’s a great place to live, it’s also a great place to work.”

Such efforts would be focused on other areas in the Northeast, especially older manufacturing cities that may not be doing as well as the Greater Springfield area, Sullivan noted, adding that he’s not expecting to lure people from Arizona or Florida.

“Sometimes, it’s a little tough to sell those winter months,” he said with a laugh, adding that the region does have many saleable assets, and its businesses need workers to grow.

Such a campaign would not have a large budget, and it would be waged mostly with social media, he said, adding that there is an opportunity to attract people for certain sectors, especially precision manufacturing.

“It will not a be a large media campaign — you won’t be seeing us on the Patriots game,” he said, adding that targeted messages promoting opportunities in specific sectors may help grow the workforce.

Forward Progress

Traditionally, the phrase one hears when it comes to the economy and the year ahead is ‘cautious optimism.’

There’s some of that this year — quite a bit, in fact. But overall, there’s more of that optimistic skepticism that Senecal spoke of and that others referenced, even if they didn’t use those exact words.

History, and some of the economic indicators, tell us that a downturn is likely, if not imminent.

But most business owners and managers just aren’t seeing it — and that’s certainly a good sign as a new year and a new decade begin.

George O’Brien can be reached at [email protected]

North Adams Vision Plan Offers Optimistic View

By Kayla Ebner
Commercial Real Estate
Community Spotlight

Community Spotlight

Mayor Thomas Bernard says North Adams has been investing in economic development, public safety, education, and a host of other areas.

Seven priorities, 43 goals, 95 policies, and 355 actions.

This tall list makes up the master plan for the city of North Adams. The Vision 2030 Plan was launched in 2011, and just this year, Mayor Thomas Bernard and cohorts revisited the plan to check up on the progress made to date.

“We had a really good session in October where we got some interesting suggestions for setting priority areas around marketing and promotion to move the needle on some of the economic developments,” he said.

In addition to the information session in October, Bernard says another will be held in early 2020 in which the town will tackle three things: review what has been accomplished so far, identify things that five years ago may have seemed urgent but are not as pressing now, and identify issues that have changed in the last five years.

The plan’s seven priorities — economic renewal, investment in aging infrastructure, creation of a thriving and connected community, intergenerational thinking, fiscal efficiency, historic preservation, and food access — are all currently being reviewed, and Bernard says these undertakings make for an exciting time in the city.

“There are some really great developments happening in a lot of different areas,” he told BusinessWest. “There’s a good chance to work in collaboration with a lot of people.”

Some of the more prominent developments include a project to build a much-needed new elementary school, updating zoning for the town, investing in public safety, and several projects that cater to younger children.

Bernard knows that, in order to be successful with new projects, the city must still take care of the older, foundational matters, and says North Adams has done a great job keeping track of both.

“We want to double down on the things we’ve already done, both this cultural development that’s happening, but also doing the foundational work to ensure that we can be successful so that we’re championing the big developments, we’re celebrating the jobs that are coming in, but we’re also making sure that the quality of life in neighborhoods is strong and solid,” he said.

“There are some really great developments happening in a lot of different areas. There’s a good chance to work in collaboration with a lot of people.”

Indeed, he says the overall feedback from the community has been extraordinarily positive, and mentioned one feeling in the city in particular: optimism.

Youthful Approach

That optimism, said Bernard, now going into his second term as mayor of North Adams, comes amid an increasing number of investments in economic development, public safety, and other key areas.

But you can’t move forward without looking back, so one big goal is investing in the youth and education sector, which includes the renovation of a very old elementary-school building.

Just a few weeks ago, Bernard and Superintendent of Schools Barbara Malkas visited the Massachusetts School Building Authority and were invited into eligibility for consideration of the reconstruction of Greylock Elementary School — a building that is 70 years old.

North Adams at a glance

Year Incorporated: 1878
Population: 13,708
Area: 20.6 square miles
County: Berkshire
Residential Tax Rate: $18.62
Commercial Tax Rate: $40.67
Median Household Income: $35,020
Family Household Income: $57,522
Type of government: Mayor; City Council
Largest Employers: Crane & Co.; North Adams Regional Hospital; BFAIR Inc.
* Latest information available

“If we’re able to be successful in the feasibility phase, then we’re invited to proceed forward, and we can put the funding plan together,” said Bernard. “It really will set the course for elementary education in the city for the next 50 years.”

Other investments for the youth population in the city include a splash park and a skate park. While Bernard acknowledged North Adams is an aging community and its leaders are always thinking about what it means to be age-friendly, he sees a lot of energy and — here’s that word again — optimism when it comes to investing in the younger population.

“What this splash park and the other main investment, which was a skate park, has done is create community engagement, excitement, energy, vibrancy, and a sense of optimism that comes from things that are youth-focused,” he said.

On the economic-development side, Dave Moresi, a local developer, recently embarked on a mill project that celebrated its grand opening this past June. Bernard said Moresi bought the mill in mid-2017, and it already has more than 50 businesses inside, including a financial-services office, a mental-health clinician, a coffee roaster, a gym, a hair salon, and much more.

“I think this speaks to a couple things,” said Bernard. “It speaks to the quality of work that Dave and his team do, but it also speaks to this moment that we’re in, bringing it back full circle to this energy, excitement, and potential.”

Moresi also purchased a school building the city no longer uses and is turning it into residential apartments.

Adding to that excitement are two enabling projects that have occurred over the past year. Bernard said bringing life into the downtown area continues to be a challenge, so a parking study was done to look at what assets and needs are necessary if the city were to attract additional housing and development. North Adams also updated its zoning map to reflect current conditions — a process that hadn’t been tackled since the late ’50s to early ’60s.

With all this activity going on, the city has also been investing in public safety. Just this year, Lt. Jason Wood was appointed as the new police chief for North Adams. In addition, the city added its first hybrid vehicle to the city fleet and is working on adding a hybrid cruise, which would make it the first city in Western Mass. to do so.

Forward Momentum

While North Adams still faces economic and socioeconomic challenges, like all cities do, the mayor feels optimistic that the community is on the path for success.

“We continue to be in an exciting time for North Adams, and I think more and more people are picking up on it, whether that’s visitors who are coming here or whether it’s longtime residents who are seeing some of these developments and being really excited about it,” Bernard said. “We have a lot of work to do to make sure we stay on an even keel.”

Kayla Ebner can be reached at [email protected]

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