HAGERSTOWN — One of Hagerstown’s largest hotels came close to foreclosure last week.

On Friday, Bahman Inc., which owns the Hagerstown Hotel & Convention Center, worked out a tentative deal with BB&T, the lender, to head off a foreclosure auction scheduled for Monday, according to Roy Arnold, the hotel’s director of sales.

“As it stands, there will be no sale,” Arnold said Friday evening.

During an earlier interview, before the tentative agreement, Arnold said, “This is a very big opportunity for us to continue to operate and operate in a manner in which this town is accustomed. We’re not going to close.”

Survival of the 108-room hotel, on 6.1 acres at 1910 Dual Highway off Interstate 70, is “very important” to other local hotels and tourism businesses, a top local tourism official said.

Hagerstown Hotel & Convention Center — with lodging, a restaurant and facilities for meetings — is among just four full-service hotels here, said Tom Riford, president and chief executive officer of the Hagerstown-Washington County Convention and Visitors Bureau.

“It is the full-service that attracts small- to medium-size conventions. This area depends on that,” Riford said. “A convention can come to Hagerstown with, say, 1,500 people. They’re going to fill up several hotels.

“So a full-service hotel greatly impacts other hotels and that’s why we really want that lodging property to be able to move forward in a positive direction. We are cheering from the sidelines that, hopefully, that hotel can make it.”

If a rescue deal hadn’t been brokered, the property was scheduled to be offered at an auction in front of the county courthouse at 95 W. Washington St. at 11 a.m. Monday.

Katheryn Hughes, a real estate specialist with American Auctions & Appraisals Inc., said Tuesday that her company “probably had eight to 10 calls” from people inquiring about the sale. She said she also had calls from brokers, representing clients.

‘A double hit’

Watchwood LLC bought the hotel in November 2006 for $7.4 million, The Herald-Mail reported at the time.

Today, it is listed as belonging to Bahman Inc., of Washington, D.C., which Riford said has the same ownership as Watchwood.

The hotel was purchased from longtime Hagerstown businessman Nick Giannaris. It opened in 1970 and the Giannaris family took on the hotel 10 years later.

Arnold, who began working in July at the hotel, said he thinks its troubles began about a year or a year and a half ago.

“I think you can attribute that to when gas was four bucks a gallon,” he said. “Fluctuation of gas prices has made it to where Mom, Dad and the kids aren’t planning vacations like they used to.”

In addition, “not as many people are going out to dinner. That takes a chunk out of our business. Not as many people are having social events. That takes a chunk out of our business,” he said.

Another big factor has been the recession’s impact on business travel, Arnold said. “Corporate income is down and one of the places they’re cutting back is overnight travel.”

Then, too, there’s the popularity of the Internet, giving businesses the chance to hold meetings in cyberspace — instead of at hotels.

“The Internet and the economy, it’s a double hit,” Arnold said.

For Hagerstown Hotel, one result is its room occupancy rates are down. One night last week, just 28 percent of its rooms were taken, whereas “two years ago, that would have been in the 60s,” he said.

And, as other hotels have opened here, there is more competition for business, he said.

But Arnold said the hotel’s owners have been determined to keep the business, which has about 90 full- and part-time employees.

“We continue to promote the hotel. This morning, I bought radio advertising. We’re doing buffets, pool parties ... These are all things that if you’re not going to be here a week from now, you’re not going to be buying advertising still,” he said.

Another sign of the hotel’s intent to survive is that Bahman paid the hotel’s county property taxes of $13,700 on June 29. That was just a day before the property would have been offered at a tax collector’s sale.

A lost summer

Riford said the hotel’s troubles are, perhaps, more seeded in a delay in its 2006 purchase and other unique problems than they are in the recession.

Riford said the sale “went through in spring of 2006, but the hotel didn’t transfer until November” because details concerning the Four Points by Sheraton chain had to be worked out.

The delay cost the new owners the extra revenue they’d normally have gained from a busy summer going into a slower winter.

“They just had bought a property, yet they didn’t have a whole summer, a real busy summer of income. They did a bunch of upgrades. With poor cash flow, that got compounded when the economy began to go down,” Riford said.

Plus, he said, “they went through a lot of staffing challenges.”

Another hurdle was the hotel’s decision to drop its tie to the Four Points by Sheraton chain, he said. At the time, the hotel said the change was a way to save on the cost of being affiliated with the chain, to compete better with other chains and to lower prices.

But that move cut off the local hotel from the Sheraton’s national reservations system, Riford said.

“There’s a great deal of business an independent hotel loses when they make the switch,” he said. So, for Hagerstown Hotel, “that compounded the problem.”

In the meantime, there are signs the recession hasn’t hit the county’s overall tourism industry as hard as elsewhere and there are indications of a turn for the better.

“Our decline wasn’t as much as it was nationally,” Riford said.

This year, employment in the leisure and hospitality sector has climbed to more than 6,000 local workers, and “we are way up in park visitation, way up over last year,” he said.

“For instance, the C&O Canal is reporting it is up 24 percent over where it was last year. Antietam (National Battlefield) says they’re up not quite as high, but they’re up as well, and the state parks are doing very well.

“... So our attractions are doing well and that translates well for our restaurants and some lodging,” he said.

The county has 46 hotels, motels, bed & breakfasts and campgrounds with cabins. In all, they offer about 2,500 lodging rooms, Riford said.

During June, nearly 70 percent — the number “we always like to see” — of those rooms were being used, he said. That was nearly 2 percent higher than last June’s occupancy rate, he said.

Also important to lodging owners is how much they can charge.

“June’s revenue (for such businesses) countywide was up over 5 percent” compared to June 2008, and from January through June, it’s up nearly 3 percent, he said.

Asked whether he knows of hotels other than Hagerstown Hotel having serious problems, Riford declined to be specific.

“I’m not going to name something by name. That wouldn’t be fair. Some of the smaller, older properties have had their challenges,” he said. “But I do want to point out there are properties that have really greatly improved and are doing fantastically.”

In addition, Riford said, two hotels — Inn BoonsBoro and Sleep Inn & Suites have opened this year — and construction of a Courtyard by Marriott has begun near Valley Mall in Halfway.

‘First and only hotel’

Jo Ann Rankin, general manager of Sleep Inn & Suites along Interstate 70 at Clear Spring, is certain her new hotel will do well.

“We are the first and only hotel in the Clear Spring area” and the only one on the long stretch of I-70 between Hancock and Hagerstown’s outer reaches, Rankin said.

She said she is setting up discount packages with such area attractions as Hagerstown Speedway and Whitetail Ski Resort.

“We will be booked solid this winter,” she predicted.

Also, at 120 feet, “we’ve got the tallest sign in the sky in Washington County,” she said.

The new hotel has three floors, 79 rooms and 14 suites, and Rankin said occupancy has been increasing since June 24, its first night.

“Our biggest night so far was 55 rooms,” a peak spurred by an event at the speedway, she said.

Rankin said the hotel’s owners are county residents Brian, Matthew, Austin and Desiree Neal. She said all 12 of the hotel’s full- and part-time employees are from Clear Spring.

Across the country

Nationwide, “the recession is hurting our industry,” said Joseph A. McInerney, president and chief executive officer of the American Hotel & Lodging Association.

The association, which has about 12,000 members representing most of the nation’s hotels, is projecting that room occupancies will fall to 55.4 percent this year, McInerney said. That’s down from 60.4 percent in 2008, he said.

Room rental rates also appear to be decreasing.

Across the country, the averages were $91 in 2005, $98 in 2006, $104 in 2007 and roughly $106 in 2008, McInerney said. “This year, it will be $96. In 2010, it is projected to be $93.”

But, he cautioned, the bigger hotel markets such as New York, Chicago and Honolulu “really throws some of those numbers off.”

Hotels in the larger cities get hit hard “because they have the large convention and meeting space, and that’s one of the first things down” in a tough economy, he said. “Then, the business traveler. And, the leisure travel is No. 3.”

Leisure travel actually “has held up in certain areas,” McInerney said.

“The summer hasn’t been as bad as we thought it would be. Americans feel vacation is their right. It’s not a luxury. Now, they might not go for two weeks, but they’ll go for one week. They might not go across the country, but they’ll go a state or two away.”

The recession has caused “a few” foreclosures against hotels nationwide, he said. Generally, “the banks take them back and, to protect their assets, they put a management company in.”

As to how many hotels any one area can bear, the answer “depends,” McInerney said.

“It depends on location. And, most lenders aren’t going to lend money if it can’t be justified. And, when they do studies for the hotel that just opened up and the one that’s just broken ground, (they figure) there was demand here and if you project it out, there’s going to be enough rooms for that.”

— Staff writer Andrew Schotz contributed to this story.