Two prominent Milwaukee hotels are in financial trouble: The 138-room Hampton Inn & Suites downtown has been returned to its lender after unexpectedly closing this spring and the 102-room Iron Horse Hotel in Walker’s Point is headed to auction to resolve bankruptcy. While these two properties each have a unique set of circumstances, industry experts say
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The Hampton Inn & Suites Milwaukee Downtown hotel, located at 176 W. Wisconsin Ave.[/caption]
Given these trends in commercial lending, Hanis and Nysse think some hotels may end up in similar situations to the downtown Milwaukee Hampton Inn and the Iron Horse.
“There are hotels right now that are operating, they’re doing fine, but they have this cloud in the background,” Hanis said.
“We may never see those issues become public, though, if those owners can resolve refinancing themselves,” Nysse added.
In the case of the downtown Milwaukee Hampton Inn and the Iron Horse, there may be no shortage of buyers as court filings say there are upwards of 2,400 interested investors for the Iron Horse and the Hampton Inn is backed by a stable brand and a prime Westown location.
“There’s always a market for hotels that go on the market. Now, one of the problems will be the age of the hotel, the condition of the hotel,” Hanis said.
The Hampton Inn initially opened as a Howard Johnson Inn and Suites in 2000 after a 10-story vacant office building was renovated. It was remodeled and converted to a Hampton Inn in 2006. When the property is sold again, it will need a significant investment to keep the Hampton Inn brand, according to Nysse.
During the pandemic, lenders allowed hotel owners to use FF&E reserve funds, which is money set aside for making capital improvements, for other expenses.
“If hotels used that money to otherwise pay down debt during the pandemic, then there’s no money left to refresh the hotel," Nysse said. "As a result, when the brands start to force the hotels to make those upgrades and there’s no money there, the hotels can’t do it.”
While that isn’t necessarily what’s going on at the Hampton Inn, it resembles what’s happening nationally, Nysee said.