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Daniel Hom/MEDILL

The W Chicago City Center hotel is just one of Chicago's hotels seeing improvements from last year.


Spring comes to Chicago hotels

by Daniel Hom
April 21, 2010


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Daniel Hom/MEDILL

A year-over-year comparison of Chicago's hotel industry for the week ended April 10. Data provided by Smith Travel Research Inc.

On a good day, Maria Martinez stands at the front desk of the W Chicago City Center hotel without having to wait too long for a visitor to stroll through the front doors. These days are good days.

“This year has been a good year so far,” Martinez said. “It’s definitely better this year compared to last year.”

 According to Martinez, the Starwood Hotels & Resorts Worldwide Inc.-owned hotel is “almost sold out,” with current occupancy rates near 80 percent. She added she expects the number of visitors to continue growing as summer approaches, especially compared with last year's recession-depressed levels.

 The W Chicago isn’t the only Chicago hotel with more people filling its rooms. In a weekly report released on April 14 by hotel industry data tracker Smith Travel Research Inc., for the week ended April 10, the average occupancy rate in Chicago hotels grew to 57.3 percent, up 15.6 percent from last year’s 49.5 percent.

 But that's still well below the 2007 peak of 67.5 percent.Jeff Higley, vice president of digital media and communications at HotelNewsNow.com, a division of Smith Travel Research, said the number one performance indicator the research data firm considers is demand.

 “That’s kind of the number that drives everything else,” he said.

 In Chicago, as of January and February combined, there has been a slight uptick of 3.3 percent in demand for hotel rooms compared with the same period last year, a trend that is true nationwide. These new numbers signal that the increase in demand isn’t a fluke; there really is a recovery in the hotel industry—even if at a snail’s pace.

 What is more encouraging is that this reflects a strengthening economy overall. Higley said that in a recession, the hotel industry is usually among the first to sink and the last to rebound.

 “The fact that we’re starting to see some signs of a recovery taking place … that indicates to me that the economy is doing a lot better and the hotel industry is starting to reflect that,” he said.

 Gary Platt, general manager for LQ Management LLC’s La Quinta Inn & Suites hotel in the Loop emphasized looking at a hotel’s average daily rate, a key performance indicator calculated by dividing total revenue by the number of rooms sold. For his hotel, the trend is up.  

 “Rates are stronger this year than last year,” Platt said, pointing to a warming up of both the weather and the economy.

 For Chicago as a whole, though, it’s a different story. For the same week ended April 10, the average daily rate was $101.37, down 8.8 percent from $111.18 a year earlier.

  However, revenue per available room, better known as RevPAR or total revenue divided by the hotel’s total number of rooms, rose to $58.03, up 5.4 percent from $55.07 for the same period. RevPAR, average daily rate and occupancy rate are the three indicators used to gauge a hotel’s health, and that of the industry as a whole.

 Looking forward, Platt said he “absolutely” expects this summer to bring in increased demand compared with last year. “[The industry is] definitely getting stronger,” he said.

 For other hotels, stepped-up demand in the form of rising occupancy rates in the upcoming weeks and months will be the key to being able to charge higher room rates and generate more revenues.Higley said once that happens, “that’s when a true hotel industry recovery will take place.”