Joe Jaeger buys historic Chateau Hotel, but isn’t done selling others amid slow tourism rebound | Business News

Joe Jaeger, owner of the largest hotel group in New Orleans, has purchased the historic Chateau Hotel in the French Quarter, though he says he is planning to shed other properties in response to the lingering devastation the pandemic has wrought on the city’s hospitality sector.

The Chateau, a converted 18th-century mansion on the corner of St. Philip and Chartres streets, already was managed by Jaeger as part of the J Collection of hotels he has built over several decades.

He bought it this month from a company controlled by longtime collaborator Darryl Berger for $11.7 million, according to Orleans Parish Assessor records, a deal that Jaeger says has been in the works since before the pandemic.

The Chateau remains closed for renovations, as is the case for all but four of Jaeger’s 17 hotels. Jaeger said he expects to reopen all the hotels he still owns by the middle of next year but sees only a slow return to normal business for the New Orleans tourism industry.

“For the most part, that’s what we’ve been doing: spending a few bucks renovating these hotels and betting on the future. We’ll have most of them opened by mid next year but I don’t think we’ll see a resemblance of 2019 until 2024,” Jaeger said in an interview Tuesday.

“We’ve gone from zero to something, but we still have a long way to go,” he added.

Jaeger’s hotels were hit hard by the initial pandemic-related shutdowns in March 2020, when he furloughed more than 500 workers and suspended operations at almost all of the properties. Only the Jung Hotel on Canal Street has remained open throughout the pandemic.

In August, Jaeger reluctantly sold the 220-room Bourbon Orleans Hotel for just over $80 million to DiamondRock Hospitality Company, a Bethesda, Maryland-based real estate investment trust.

It had been one of the jewels in his hotel group since he purchased it in 2003 from Wyndham International, Inc. spending millions on a top-to-bottom makeover that was completed in 2012.

The proceeds of the sale were used to pay down debt on his other properties, which helped him avoid the fate suffered by thousands of other hoteliers during the pandemic. Many were backed by securitized debt, and defaulted when business and leisure travel dried up.

“You’re not supposed to fall in love with real estate but I had no intention of selling the Bourbon and it breaks my heart,” Jaeger said, “I still have seller’s remorse.”

The pandemic impact on the hotel sector has been larger than on many others. The American Hotel & Lodging Association argues that the hotel sector has had to bear a significantly higher unemployment rate than other hard-hit sectors, such as restaurants and airlines, but unlike those sectors, it has yet to receive any direct federal government aid.

In August, Jaeger and Berger completed a deal to sell their interest in the Omni Royal Orleans Hotel in the French Quarter to Robert Rowling, the Dallas-based hotelier who controls the Omni Hotels & Resorts Group. Rowling has been buying out developers and franchisees of his higher-end hotels as part of a long-term strategy to own them outright. The terms of that sale weren’t disclosed.

Now, Jaeger said, he likely will sell more properties over the next few months before he is finished re-shaping his hotels portfolio.

First on the auction block is The Whitney Hotel, the 93-room former Whitney Wyndham on Poydras Street that Jaeger bought from developer Paul Flower in 2014 for $10.4 million. A deal is expected to be completed by the end of the year, he said.

There have also been offers on the 200-room Maison Dupuy on Toulouse Street, another of the 11 boutique French Quarter hotels in Jaeger’s portfolio.

Jaeger said there are some properties that don’t fit into his J Collection strategy anymore. The New Orleans Airport Hotel — formerly a Crowne Plaza franchise — is one. It is currently being sub-let to Shell Oil to accommodate some of its staff and he is looking to offload that when the market improves.

After the sale of the Bourbon and Omni Royal in the French Quarter, it no longer makes as much sense to hold onto the Nottoway Plantation & Resort in White Castle, which Jaeger bought in early 2019 for $3.1 million, he said. Before the pandemic, the two city hotels had been feeders of guests to Nottoway for weekend excursions who then returned back to the French Quarter during the slower weekdays. But that business is now gone, Jaeger said.

Jaeger, 74, who sometimes refers to himself as “just a plumber from the 9th Ward,” made his initial fortune in plumbing and building supplies in the 1960s and ’70s. He turned that into the full-scale development and hotel group that has made him one of the city’s most influential figures in business and real estate.

The pandemic has led not only to a rethink of the hotels portfolio, but also saw him offload other properties, including the former Lindy Boggs Medical Center in Mid-City, which he had planned to convert into an elder care facility. Plans for Plaza Tower, the former office tower on Loyola Avenue, also are uncertain now that financing for such major rehabilitation projects has dried up.

The big Drive Shack golf-entertainment project at the site of the old Times-Picayune building on Howard Avenue also is uncertain because of the after-effects of the pandemic, though Jaeger is the landlord on that project and is collecting rent while the development group decides how to proceed.

Despite the late-summer surge in coronavirus cases and the after effects of Hurricane Ida, the New Orleans hotel sector has been showing some signs of improvement this autumn.

According to STR, which tracks industry data, occupancy rates in October and November have averaged around 65%, compared to below 50% during the same period last year. Though that was still below rates around 75% to 80% in 2019, average daily rates have been about $10 higher than 2019, at $170 a room. That was up from around $100 a room last fall.

Still, Jaeger said he has worries about the hospitality sector other than just the raw occupancy and room rate numbers.

“New Orleans, in my opinion, is not the city it should be for a lot of different reasons,” he said, noting that similar, smaller “destination cities,” like Nashville, Austin, and Louisville, have made more progress in modernizing their attractions and “cleaning up” their main tourist areas.

“People still come here based on the city’s image as a cheap date, and that keeps rates and prices down and has an impact on our workforce and their prospects for development,” he said. “I’ve said it over and over, we have a hospitality district, and not just the French Quarter, that’s dirty and we need to work on the safety issues, we’re stale, and we need more exciting things to happen.”

There has been talk for decades about improvements but they have never gone anywhere, he said, and now the coronavirus restrictions has put things even further back.

Jaeger said he still sees hope for a higher-end “entertainment district” along the riverfront as part of the multi-billion-dollar plans to develop the barren acres owned by the Ernest N. Morial Convention Center.

Though he is near to completing the sale of the abandoned Market Street Power Plant that he owned for years and planned to develop, he says he still expects to retain an interest in turning that into a music and entertainment venue.

“We’ve talked about all the natural resources we have in this city but we haven’t capitalized on them,” he said. “Somehow, we’ve got to get this turned around.”