Chicago's High Room Rates Linger Despite More Rooms
<B> Chicago's High Room Rates Linger Despite More Rooms</B>
By Deborah Mora
Despite an increase of more than 1,700 hotel rooms in its downtown inventory, finding a room--much less a good deal--remains a challenge in the Chicago area. But the addition of 3,000 more proposed rooms could ease the tight market.
For the Chicago metropolitan area, the year-to-date average room rate rose from $99.92 last year to $108.16 this year. The occupancy rate, however, fell from 72.4 percent last year to 71.8 percent this year. Nationwide, 1998 room occupancy statistics hovered between 70.2 percent and 78.9 percent, compared with a 1997 range of 69.3 percent to 78.6 percent. Meanwhile, average daily rates were as high as $188.43 and as low as $89.20, compared with 1997, when the most expensive room averaged $170.53 and the least expensive, $83.56 a day.
Gary Carr, director of communications for PKF Consulting in San Francisco, projected the increasing daily room rate trend will continue into 1999. "There's not going to be any room for negotiations for travel managers," Carr said. "We don't see any bargains in the coming year." The solution, he said somewhat tongue and cheek, is "to hold conventions in Des Moines." He added that major convention cities such as Chicago, Las Vegas and New York likely will not offer lower room rates.
Marc Gordon, president of the Hotel-Motel Association of Illinois provided some hope for travel and meetings buyers in search of a good deal. "As new hotels come on, there will be more opportunities for discounting and packaging," he said.
Since March, six new hotels have opened within Chicago's city limits, adding more than 1,700 rooms to the approximately 29,000 rooms in the city's hotel inventory, Gordon said. The list included the 800-room Hyatt Regency-McCormick Place, 483-room Allegro Hotel Chicago, 367-room House of Blues-Loews Hotel, 220-unit Hampton Inn Suites, 192-room Monaco and 59-room Best Western-Hawthorne.
Adjacent to McCormick Place, the new Hyatt replaced the McCormick Inn, which was demolished in 1993 to make room for the South building expansion. The $108 million hotel was designed specifically for business travelers, with rooms featuring ergonomic chairs, halogen lamps and power strips with grounded outlets.
The 12-story Hampton Inn & Suites Hotel, at the corner of Dearborn and Illinois streets, features a Fog City Diner. A second-floor skywalk connects the hotel with another restaurant, Ruth's Chris Steakhouse next door.
Hotel consultant Ted Mandigo of TR Mandigo and Co. in Elmhurst, Ill., said that with all the rooms that will be available in the city by the beginning of next year, hotel operators will push to book, perhaps offering better deals than market conditions currently dictate.
Other new hotels scheduled to open between now and 1999 that will considerably increase Chicago's room inventory include the Allerton Hotel, which will open as the Crowne Plaza-Silversmith Hotel, the Wyndham Chicago and the Hilton Garden Inn.
During off-peak convention months, this supply of rooms could place travel managers at an advantage, Mandigo said.
"There will be a strong opportunity to negotiate rates," Mandigo said. "In the fall and the spring, hotel operators tend to quote at higher levels because they anticipate being full." His advice to travel buyers: "If I had a contract signed a couple years ago, I'd call the hotel operators and see if I can talk to them about room rates."
As for other 1999 outlooks, Carr projected room occupancy rates likely will decline nationwide for the end of 1998 and 1999. In Chicago, occupancy rates probably will fall 2 percent by the end of 1998 and then a few more points in 1999, Mandigo said.
Regardless of what consultants project, industry officials pointed out the cyclical nature of the hotel business and the short time it can take for the industry to take a fall.
Gordon said that although room demand in Chicago is high, hotel expansions will begin to take their toll within the next two to three years, and construction will start to slow down.
According to HMAI, there are nearly 80 hotels planned for the Chicago area, but Gordon said many of these deals probably will not go through because of the sporadic nature of the industry and the nation's economy.
In other hotel news, the Drake Hotel recently completed a $40 million refurbishment of the front entrance, lobby, Palm Court restaurant/meeting room, executive floor lounge and French Room meeting space. Listed on the National Register of Historic Places, the Drake retains the flavor of the 1920s and 1930s and all work has been completed with the approval of the Chicago Landmarks Commission. In addition to the public space, all suites, executive floor rooms and 70 deluxe rooms were renovated this year. An additional 150 rooms are scheduled for renovation in 1999 with the remaining 535 slated for refurbishing in 2000.