Four Hot Hotel Stories
After seeing almost as many new hotel announcements each week as Ice Bucket Challenge videos, we asked Paramount Lodging Advisors senior managing director Dan Beider for his top hotel stories:
Supply Is Catching Up With Demand
Dan (can you tell he's a Cubs fan?) tells us that 2,000 rooms are under construction right now, and around 6,000 are in some stage of development. With 2013 RevPAR growth at only 3.8% (in the same year Chicago had its highest occupancy in city history), he wouldn’t be surprised if supply surpasses demand by the end of this year. Most projects are high-end and around the Loop, West Loop, and River North, he says, which is somewhat concerning. In the event of any future economic shocks, the number of people able to pay luxury prices could drop quickly, he adds.
Many Flavors of Development
As the Loop becomes more of a live/work/play neighborhood, hotels are coming in despite a dearth of ground-up sites. That’s led to significant adaptive reuse of old office buildings (Hyatt, above, Kimpton, Hampton Inn), Dan says, though it’s easy to blow budgets on those projects given their tricky construction. He thinks the new Residence Inn by Marriott makes a lot of sense given the business district’s surprising lack of extended stay options. The West Loop affords more options to build new, and more hotels should quickly follow this cycle’s latest crop of office towers in the submarket, he says. Projects further afield, like the hotel included in Wrigley Field’s massive renovation, will also be interesting to watch.
The Embrace of Soft Branding
With so much supply coming online, what makes a hotel stand out? Soft branding is on the rise and will be an imperative differentiator, Dan says, like Hilton’s Curio Collection or Marriott’s Autograph Collection (including Hotel Chicago, above). Especially for converted hotels looking to maintain the history and unique charm of their historic property, soft brands allow a hotel to preserve its own identity while tapping into a global brand family. That means a hotel can name itself after its iconic building (bye bye, cookie cutter brand hotel) but still have access to the larger network's loyalty program, reservation system, etc. We’ll definitely see more of that around the Loop, Dan says.
High Transaction Volume Unlikely To Slow
Paramount, just named to Inc.'s fastest-growing private companies list, has a portfolio of 15 foreclosed limited-service Midwest hotels (five around Chicago) under contract, Dan says, after an astronomical 150 offers. Since the industry turns over so quickly, there’s always new investor groups, private equity, and offshore capital looking to park money in Chicago-area hotels, he says. (Though foreign investors prefer ultra high-end, which rarely trades.) The ability to turn and flip will remain enticing to opportunistic investors, but that’s under the right circumstances with construction costs in check. Dan coaches his 11-year-old’s baseball team, and a highlight this summer was playing on the Field of Dreams (above) in Iowa.