Rosemont, which has been expanding with numerous restaurants and shopping outlets, and the airport region are doing better than last year, but hotel room rates across the suburban region are still too low, said Robert Habeeb of Rosemont-based First Hospitality Group Inc.
Room rates have increased roughly 5 percent to 6 percent, while demand has increased about 7 percent, he said.
“Room rates just didn’t keep pace,” Habeeb said.
Such discrepancies aren’t unusual, and hospitality experts around the suburbs said we should expect the rebound to continue for the suburban hospitality industry.
But it will be slow. After all, there has been an increase in groups that want to hold meetings and events and others catering to tourists. Just don’t expect the rebound to be profound, they said.
The slowest to rebound has been the western suburbs, where events and visitors have been lackluster at best, Habeeb said.
“At one time, that area was strong, but it hasn’t been at the same level it was before the recession, the tech wreck and the office vacancies,” he said.
Still, Habeeb sees the western suburbs improving steadily by next year.
The strongest in the region is Chicago, and much of that business is feeding into the nearby suburbs. When Chicago hotels are at full occupancy, more will seek rooms in the suburbs in what experts call a spillover effect.
But whether that will continue with more hotels being built in downtown Chicago is yet to be seen, Habeeb said.
The suburban market already has several large hotels, including Westin North Shore in Wheeling, the Renaissance in Schaumburg and others.
“The suburbs could hold their own as long as we don’t build any more behemoth hotels,” Habeeb added.
Ric Mandigo, senior consultant at T.R. Mandigo & Co., a consultancy firm based in Elmhurst agreed. While the area is doing better than last year, it has been “plateauing on occupancy.”
“This seems to be an effect of new construction properties opening up, specifically downtown, though that has a strong affect on the suburbs, rather than a depression,” Mandigo said. “Momentum outside of downtown is fairly depending on the region.”
Some recent hotel projects and developments include a mixed use development with a 168-room Embassy Suites Hotel in Naperville. Another is the former Renaissance in Oak Brook Mall that’s converting to Le Meridian and expected to be completed by 2014.
Also, the Hampton Inn Northwest, at Higgins and River Road in Rosemont, is expected to have about 150,000 square feet of office building and a parking deck. The hotel will be last in the construction phase and likely start in 2014-2015, the Mandigo report said.
However, Mandigo believes room rates are up, but not as dramatically as they were in 2009 through 2011.
“Those were the result of really depressed rates following the crash,” Mandigo said. “Rates are almost to where they were in the past, but we’re not there yet.”
In a report that Mandigo’s firm released in August, the Chicago metro area will see a dramatic increase in available hotel rooms by 2013. And while the market has essentially recovered, the suburbs are still in the doldrums.
“On a year to date basis the several suburban areas aside from the airport are operating at rates of from 57 percent to 63.6 percent occupancy and the (other) levels are well below the metro average,” the report said. “Rates on a year-to-date basis are from $78.91 in the southwest market to $90.74 in DuPage County. The recovery is two to three years out and relies on continued economic growth and the dearth of new construction throughout the suburbs.”
One area that some experts are seeing some growth are large galas and corporate-sponsored functions.
A Barrington-based event planner said she coordinated two of the largest galas in the area that brought in more than $4 million. They were the Housewares Charity Foundation Gala with 1,000 people in March, and the Alzheimer’s Association’s Chicago Rita Hayworth Gala in May with more than 900 guests, said Ann Marie Arzt, president of EventScape Inc. in Barrington.
More people are attending galas and auction revenues are back to where they were a few years ago, Arzt said.
“Corporations, which stopped providing sponsorship dollars, are now active in the gala market again, so overall attendance and revenues are up,” Arzt said.
“However, the downturn that occurred beginning in 2008 caused most nonprofits to immediately tighten their belts and reduce their overall spending on their events. These tightened budgets are still in place in most cases, despite the revenue growth.”