Chicago will host more major conventions in 2017, but the local hotel market could still find itself tested with as many as 3,000 additional guest rooms coming online, raising concern about oversupply.
When the books are closed on 2016, the hotel occupancy rate likely will be 74.5 percent, down from 76 percent in 2015, said Ted Mandigo, director of Elmhurst-based hospitality consultant TR Mandigo & Co. It was 75.7 percent in 2014.
The challenge: The supply of rooms has been outpacing demand, he said.
The additional rooms coming in 2017 will bring the city’s total to 44,000. And the occupancy rate in Chicago hotels likely will fall again, to 72.5 percent, he said. The drop might be even steeper were it not for a convention market that will likely be a little stronger than it was in 2016, which had been hit by a double whammy. Reasons for the anticipated convention bounce: Convention planners generally arrange their meetings in cycles, and 2016 was an “off year” for Chicago, Mandigo said. Also, Chicago had been a bidder for the recently concluded Summer Olympics, a prospect that several years ago made convention planners wary about scheduling 2016 events but more open to holding events in the city in the following year.
David Whitaker, chief executive of Choose Chicago, the city’s convention and tourism bureau, said the city will host 35 major meetings in 2017, up from 31 in 2016.
Of those three dozen or so groups, 12 will hold their first meetings in Chicago, said Whitaker, who was hired for the job in June.
“No destination, whether it’s meeting or leisure travelers, can just depend on the business they’ve already enjoyed,” he said.
The Chicago Cubs‘ World Series win can only help the city’s tourism efforts, he said.
Whitaker said a recently announced trophy tour will help raise Chicago’s profile in those markets, which, according to the Cubs’ website, include Indianapolis and Des Moines, Iowa.
The city’s hotels have been averaging around 75 percent occupancy for the past several years, Whitaker said. While not as high as New York, Miami and San Francisco, that rate puts the city in the top 10 of U.S. markets with the highest occupancy, he said.
The volume of travelers to Chicago has been growing. Chicago exceeded 50 million domestic visitors for the first time in 2015, attracting 52 million overall.
In 2012, there were about 100 hotels in what Whitaker considers the central business district, encompassing a select group of hotels in 14 ZIP codes, as far north as North Avenue, west down the Eisenhower to Kedzie Avenue, then as far south as 55th Street.
In 2017, there will be about 130 hotels, he said. Over that same time frame, the number of rooms will have climbed from 35,000 to 42,000.
“It’s good for consumers and it means that developers are confident in the city, but it puts stress in the system if the pace of rooms outpaces volume,” Whitaker said.
The city must attract more international travelers, which made up only about 1.5 million of the approximately 52 million travelers in 2015, he said.
“There’s no reason we shouldn’t be welcoming 2 million, 3 million, 4 million, 5 million,” Whitaker said, noting that adding more gates at O’Hare International Airport would help.
“You’d get more airlines seeing the potential of Chicago,” he said.
Construction recently began on a new east-west runway for O’Hare that is expected to open in 2020. The city said the runway will improve on-time performance through increased capacity and flexibility, and that it will be able to handle the biggest planes — the kind that come from and go to Asia and Australia. The city also has said that major airlines have agreed to build up to nine new gates.
Chicago also has been overdependent on regional visitors, with three-quarters of Chicago visitors coming from eight neighboring states, Whitaker said.
“That’s too many eggs in one basket,” he said. “We’re the playground of the Midwest but we need more from Boston, New York, Florida.”
Chicago Mayor Rahm Emanuel has a goal of attracting 55 million visitors annually by 2020.
Reaching that milestone is critical if Chicago hotels are to achieve a healthy occupancy rate, Whitaker said.
The biggest property to open in 2017 will be the 1,205-room Marriott Marquis Chicago, which will be directly connected to McCormick Place. The hotel will include dining options and bar space on the first floor.
“It will be a cool big space where you can be alone together,” said Lori Healey, CEO of the Metropolitan Pier and Exposition Authority, which owns McCormick Place. “People can plug in and work and not sit in their room.” It will also have a rooftop venue, she said.
Properties opening in 2017 also include a 198-room Cambria hotel above the Oriental Theatre on West Randolph Street in Chicago’s Loop. Cambria is a new upscale brand from Choice Hotels, a publicly traded company whose other lines include Comfort Inn, Clarion and Econo Lodge.
Choice, along with partner Fillmore Capital, in November also converted the former MileNorth Hotel at 166 E. Superior St. into a Cambria. About $14 million will be spent to renovate the 215-room property in 2017, from February to June, General Manager Ian Heffron said.
Much of that spending will go toward the rooms, including new beds and new bathrooms in which bathtubs are replaced with walk-in showers. Also, 32-inch TVs will be replaced with 55-inchers.
Spending on technology will include a mobile app that will enable people to check in on their phones, pick their rooms and bypass the front desk.
“Your key is your phone,” Heffron said.
Space devoted to the fitness center will about double. The rooftop bar, which is enclosed during the winter, also will be renovated.
The hotel had been seeing an occupancy rate averaging 79 percent, but Choice expects it to rise to the low 80s, Heffron said.
Also being renovated in 2017 is the Talbott Hotel. About $20 million will be spent on the Gold Coast property, which closes Sunday and is expected to re-open in May. Renovations include expanding the number of rooms from 149 to 178. Improvements will also include a new lobby and guest reception area, and updated meeting and event spaces.
Many of the hotel’s workers — more than half of whom have worked at the property 10 years or more — will be kept on the payroll during construction, a spokeswoman said.
Chicago-based hotel operator Hyatt, which has 24 hotels in the metro area across six brands, expects more citywide events in 2017 compared with 2016, although growth in the company’s Chicago business is “expected to be modest as hotel supply has increased,” said David Phillips, senior vice president of field operations. The company also will make changes to its loyalty program in 2017.
Other hotels expected to open in 2017 in Chicago include the Viceroy in the Gold Coast and the Nobu Hotel, backed by actor Robert De Niro, in the West Loop.