[Baltimore Sun] Baltimore mayor Brandon Scott says he’s willing to consider selling city-owned Hilton

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Baltimore Mayor Brandon Scott said Wednesday he would consider selling the financially beleaguered Hilton Baltimore Inner Harbor hotel, a move that past mayors have ruled out in light of the likely financial loss the city would suffer.

“We are open to anything,” Scott said during a City Hall news conference. “As we move forward with reimaging downtown and looking at how things operate, I’m quite open to someone coming in to operate the hotel and not having the city operate it.”

Scott’s statement came on the heels of a decision by the Baltimore Board of Estimates on Wednesday morning to award a $989,000 grant to the hotel to be used for administrative costs that hotel operators have struggled to pay for in the wake of the pandemic. The grant, which was approved by a 4-1 vote with Council President Nick Mosby voting against the payout, will come from the city’s $640 million allocation from the American Rescue Plan Act, a federal pandemic stimulus program.

The 757-room hotel, situated next to Oriole Park at Camden Yards and adjacent to the city’s convention center, has cost Baltimore taxpayers millions of dollars since the onset of the pandemic. The $300 million in bonds borrowed when the hotel was constructed in the mid-2000s require the city to pitch in if the Baltimore Hilton cannot cover its bond payments. Since fiscal year 2022, Baltimore has contributed the maximum $7 million payment toward the debt service.

The financial drain of the city-owned hotel, however, began well before the pandemic. A 2014 audit of the hotel showed it underperformed financially for seven consecutive years. That year, the hotel lost $5.6 million, a stark contrast to projections which anticipated a $7 million profit by 2014. Profits were supposed to be used to bolster Baltimore’s budget.

One year earlier, having already lost $50 million on the hotel, city officials ruled out selling it, however, after a consulting firm hired to analyze the hotel’s operations showed they would take a loss. At the time, officials said the city stood to lose $60 to $90 million if it sold the hotel.

Davenport & Co., the consulting firm hired, found the hotel was performing better than most of Baltimore’s private hotels based on occupancy and room rates. The consultant predicted that the hotel would generate $4.5 million more by 2017.

In 2017, the hotel refinanced its debt and began to eke out a profit, despite still performing below projections. That came to a halt during the pandemic when the hotel was closed for almost a year and temporarily operated as a field hospital.

The 2013 report from Davenport said the city could not get a sale price for the hotel that would be enough to cover the debt owed on the property.

Today, $256 million is still owed to bondholders as well as nearly $198 million in interest. In 2023, the hotel owed almost $13 million in interest alone. The hotel lost $930,596 in 2021, according to its most recent financial statement, better than the $20 million lost in 2020.

Asked if the property would be marketable amid diminished hotel occupancy rates that continue to lag after the pandemic, Scott said Wednesday “we’ll see.”

He noted that tourism revenue has rebounded in the city. According to the city’s budget for fiscal year 2024, demand for hotel rooms was 81.4% of pre-pandemic levels as of December 2022. Demand is projected to increase to 89.5% of pre-pandemic levels by the end of fiscal year 2024 in June.

Economist Anirban Basu said he thinks Scott is on the “right track” if he’s considering selling the hotel. While the city would likely suffer a financial loss, Baltimore would “de-risk” it’s balance sheet by removing the hotel from its books, Basu said.

Basu questioned how many buyers may be interested in the property, however. Baltimore has other more modern hotels less than a mile away from the Hilton. While the property is close to Camden Yards, designers failed to link the hotel to the ballpark architecturally, he said. Consequently, it’s less of a destination.

The hotel has the benefit of sitting close to the convention center, which is a preference for convention attendees, Basu said. But the city’s convention center has aged and is under-utilized, he said.

“How many people are in the market to buy a hotel in downtown Baltimore with this kind of operational requirement?” he asked. “There aren’t that many hotel chains out there. There are many other cities in which an investor might want to invest before they got down their list to Baltimore.”

Still, there’s no harm in listing the property, Basu said.

“You say to the world, this hotel is up for grabs,” he said. “If you don’t like the price, you don’t sell.”

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