Losing ground to Orlando, Las Vegas and even some other
Midwestern markets, Chicago intends to reclaim some convention and trade show
business. The owner of Chicago's McCormick Place convention center is planning
a new 1,200-room "headquarters" hotel to be built adjacent to the
facility, meant to attract about 15 additional "midmarket events" and
80,000 more attendees each year. Along with a big renovation and expansion
project set to wrap up this summer at the pre-existing on-site hotel, a Hyatt
Regency, development in the area would more than double the number of hotel
rooms in McCormick's immediate vicinity.
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Announced in February, the new hotel project would "provide
the facilities and amenities required to serve as the headquarters for groups
holding shows at McCormick Place," the nation's "largest convention
center," according to the Metropolitan Pier and Exposition Authority. "The
hotel's size, facilities and location will allow conventions and meetings to
use a single property near McCormick Place as their headquarters."
The hotel also would offer a restaurant, meeting space,
ballrooms and a skybridge to McCormick's West Building.
When the $400 million project was announced, city and state
officials boasted that it would further strengthen Chicago as a convention
location. MPEA noted that Chicago's biggest competitors for large events,
Orlando and Las Vegas, "already have headquarters hotels adjacent to their
convention centers."
"The idiosyncratic thing about McCormick Place is that
it's a 10-minute cab ride from downtown," said PKF Consulting vice
president Mark Eble. "When it comes to competing with Orlando, Las Vegas,
Miami or New Orleans, with this huge space at the McCormick, there has only
been several hundred hotel rooms at the Hyatt there. It is remarkable in some
ways that Chicago has done as well as it has.
"Chicago has been whipsawed," Elbe continued,
explaining that the market also has been adversely impacted by development in
the Midwest, including new convention facilities in Indianapolis that attract
midsize events. "Second- and third-tier cities are nipping at Chicago's
heels in ways they never have before."
Ted Mandigo, director of hotel consulting firm TR Mandigo
& Co., added that the move to build the new headquarters hotel reflects a desire
"to accommodate multiple trade shows" simultaneously. He said he
expects Hilton, Starwood, Marriott and InterContinental Hotels Group to bid for
the rights to manage the property, once MPEA builds it.
According to the Chicago
Tribune, once property rights for the location are sorted out, MPEA will
solicit proposals from hoteliers and designers, with construction underway by
late 2014 and completed by late 2016.
Meanwhile, the Hyatt Regency Hotel at McCormick Place—also
owned by MPEA—is undergoing a $110 million upgrade. Scheduled for completion
this summer, the project includes a second tower with 460 guest rooms, a "complete"
renovation of the existing 800-room tower, a makeover for the 25,000-sq.-ft.
conference center, updated restaurants, three new boardrooms and a new business
center.
Elsewhere In Chicago
Hotel development in downtown Chicago isn't confined to
McCormick Place. Mandigo said the pipeline there is as healthy as it's been in
a while, and the number of overall room nights sold continues to rise. That,
along with "substantial investment at the properties," he said, has
helped maintain growth in the average daily rate. "We are seeing recovery,"
Mandigo said. "In 2007, we were at an ADR for the Chicago downtown market
of about $207. We dropped off to the $160s in 2008 and 2009 and we are still
struggling to get back. We are probably at about $190 or $195 now. I would
think by next year we'd be back at that 2007 level or probably a little above."
PKF is tracking a similar trend, calculating that downtown
Chicago in aggregate during the third quarter of 2012 showed an ADR of $178,
the highest since early 2008. "In the Rust Belt, downtown Chicago is one
of the few genuinely bright spots," Elbe said. "We would expect
downtown Chicago to achieve 2007 levels in 2013."
Overall, PKF projected that total Chicago hotel occupancy
during the coming year will increase to 66.9 percent, up half a percentage
point from the previous four quarters. Overall ADR in that same time period is
expected to jump 7.1 percent.
Other new projects and developments in the city include:
• The InterContinental Chicago Magnificent Mile in January
began "a comprehensive renovation" of 477 guest rooms and corridors.
The $12 million project is expected to be finished this month.
• Loews recently broke ground on a 400-room hotel in
downtown Chicago's Streeterville section, due to open in 2015. According to
Loews, it will include "more than 25,000 square feet of innovative meeting
space," a "signature" restaurant, outdoor terraces, a spa and a
fitness center.
• Starwood is developing a boutique hotel "affiliated
with the Sheraton brand" across from Wrigley Field, home of the Chicago
Cubs. According to the company, the property will "be a key anchor
component of a large-scale entertainment and retail development."
This report
originally appeared in the March 18, 2013, issue of Business Travel News.