Chicago Hotels See Rebound
After suffering a dropoff in convention and meetings business in the first six months..
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 After suffering a dropoff in convention and meetings business in the first six months of 2004, Chicago-based hotels are optimistic that bookings will rebound in the next 12 to 18 months. When those bookings return, companies may see higher prices and have less negotiating power.

Meeting space rates in 2005 will be 10 percent higher than this year, and buyers can expect sleeping room rates to jump 6 percent 10 percent over the same period, said Scot Cotton, director of sales and marketing at the Chicago Marriott Downtown-Magnificent Mile.

Anticipating a strong 2005 and 2006, the Marriott has invested $12 million into all 1,200 of its rooms, with renovations slated for completion by the end of March.

For most of 2004, it has been a buyer's market in the Windy City. Businesses had negotiating power and benefited from a surplus of rooms during a dramatic slowdown in transient travel and corporate meeting sales.

According to Smith Travel Research, revenue per available room declined 0.7 percent from January to June 2004. In comparison, RevPAR increased 8.2 percent for the United States during the same time period.

"Chicago has seen the greatest rate decline," said Jan Freitag, who is a director at Smith Travel Research. "The drop is inconsistent with the rate increase that we observed throughout other major metropolitan areas."

According to Freitag, occupancy from January to June 2004 at Chicago hotels was 58.9 percent and the average room rate was $99.35. In contrast, hotel occupancy in New York City was 78.7 percent, with an average daily rate of $172.89 during the same period.

The drop in Chicago's meetings in the first half of 2004 largely was due to the cyclical nature of the city's convention business.

"Citywides come to Chicago every two or three years, and it just happened that in 2004 we didn't see a lot of rotations," Marriott's Cotton said. "We expect demand to increase into this year and next."

There already are signs that business is returning to Chicago. The occupancy rate for the month ending Aug. 14 was 75 percent, according to Smith Travel Research.

Cotton predicted Chicago hotel prices soon will be on par with the prices the industry had in 2003—considered a relatively successful year in Chicago meeting sales—and expected that Chicago's 2005 rates will compete with those found in such cities as New York. Cotton noted "there is going to be less negotiating ability going into 2005."
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