Industry Spotlight: Hospitality

Derek Miller  /   January 27, 2022

Hospitality & Tourism in Maine:

Maine’s hospitality and tourism market generates an average of $11 billion annually and is one of the state’s largest economic sectors. Portland is at the center of this sector as Maine’s largest city and one of the state’s biggest draws. Last year, I highlighted the pandemic-related challenges faced by Portland’s bustling restaurant industry. Twelve months later, we will look at how restaurants met those challenges, while also zooming out to look at the city’s hospitality industry as a whole, as well as that in Bar Harbor and beyond.

In December of 2020 there were approximately 20 retail locations comprising nearly 56,000 square feet available in downtown Portland – the most retail/restaurant space available in a decade. This was a daunting amount for landlords to have coming to market at once. Not all of that space was vacant at the time of the survey; however, the positive absorption over the past year has been surprising, even for someone as bullish as I was. A survey of available retail suites for downtown Portland shows that about half of that space has either been renewed by existing tenants or leased by new businesses.

The pivot to outdoor seating was an effective tool that many restaurants leaned on last winter and continue to offer. The city supported these efforts with temporary street closures, and by permanently closing Wharf and Dana Streets and a portion of Milk Street to vehicular traffic. Using some of the $46.3 million in federal funds from the American Rescue Plan, Portland hopes to renovate Wharf and Dana Streets to make them more pedestrian friendly. Improvements could include new pavers or cobblestones, and the city is exploring the idea of creating a small park on Dana Street.

Street closures are part of the city’s Open Air Portland plan, which also allows restaurants to create “parklets” in former parking spaces. There are currently 37 parklets licensed in the city and Open Air Portland plans to make the program more accessible by eliminating the cap on the number and lowering fees.

Overall, the progress made by Portland’s restaurant industry over the past year has been very promising. In many ways, it seems as though all the early ground lost to COVID-19 has been recovered. From a commercial real estate perspective, things are seemingly back to normal. According to tax records, spending at Maine hotels and restaurants topped $1.8 billion for the first six months of 2021, a 5% increase over 2019.

However, as the effects of the pandemic continue to ripple out, new challenges have emerged. Supply chain problems and a statewide labor shortage will be two of the biggest concerns for restaurant owners fortunate enough to have stayed open through the pandemic; the latter could be the biggest hurdle the sector faces going forward.

Portland’s hotel industry, long a significant driver of new development downtown, is booming as well. Two new hotels opened in 2021; the Canopy  by Hilton Portland Waterfront at 285 Commercial Street (home of the aforementioned Luna and Salt Yard) and Aloft Portland at 379 Commercial Street. Another, the 72,797± SF Cambria Portland Hotel, is currently under construction at 25 Hancock Street. These hotels join a host of newcomers over the past decade, including the Hyatt Place, The Press Hotel, the Courtyard by Marriott, and the AC Marriott, which sold in August for $66.8 million (approximately $375,000 per key) to Apple Hospitality REIT. This sale is a telling indicator of sector strength; Apple Hospitality is planning to double down on the Portland market, with an agreement in place to purchase the newly completed Aloft as well.

According to data provided by STR, revenue per available room (RevPar) for the Portland market improved by roughly 10% for June 2021, compared to the same month in 2019. That is telling, considering that the hospitality business in Maine as a whole had grown 11 straight years in a row, culminating in all-time records for revenue in 2019. Based on total room inventory (TRI), Portland had the highest August hotel occupancy rate in the country at 88%—14 points better than the national average.

Average daily rate (ADR) measures the average rental revenue earned for an occupied room per day—an extremely important metric for determining hotel performance. Multiplying ADR by the occupancy rate is what yields revenue per available room. In a recent survey of 30 hotel markets on the east coast, Bar Harbor ranked third and Portland fourth in terms of ADR ($376 and $354 per night respectively), trailing only Martha’s Vineyard ($474/night) and Nantucket ($421/night). Conversely, Boston’s hospitality market has been one of the country’s hardest hit. Boston’s RevPar for May 2021 was a shocking 67% lower than it was in May of 2019. A possible explanation for the disparity could be Boston’s traditional reliance on business travel, while Portland’s market is driven by tourism.

Perhaps Maine’s most prominent destination is Acadia National Park. Through the first seven months of 2021, park visitors topped 1.9 million (up 10% from 2019). Traffic exceeding pre-pandemic levels is straining the park due to the same staffing issues that are plaguing the hospitality industry as whole.

The hospitality industry lost 13,000 workers nationally during the pandemic. Many of those workers moved on to jobs in other sectors. Across the country, 6.6% of all workers in accommodation and food services quit their jobs in September 2021 according to Morning Brew. Staffing shortages for hotels are not as plain to see as the restaurant industry but can result in measures such as closing rooms because they cannot be maintained, thereby limiting profitability. Staffing shortages in restaurants create longer wait times and back of the house issues, while at Acadia, park ranger posts sit vacant and other critical roles go unfilled.

All of these concerns led a nonprofit, HospitalityMaine, to release a plan called Dirigo Hospitality 2025. The ambitious plan is aimed at engaging Maine youth to highlight and foster job opportunities in the sector. It also aims to provide better training for current workers to help businesses function more efficiently with a slimmer workforce. By engaging Mainers at a younger age, the hospitality industry hopes to attract and retain more local talent and create a more resilient long-term workforce.

Staffing problems are not new to Maine. However, the somewhat unexpectedly swift return to “normalcy” in terms of visitors to the state has forced local businesses to do more with less. It is clear that Maine’s business fundamentals continue to warrant further expansion within the sector in 2022; it will be interesting to see if operating inefficiencies will hamper how far and fast it can grow.


Derek Miller


Derek Miller, Partner