Illinois Business Journal - Hotels rebound from sluggish economy, lure local tourists

Despite 2001, the worst year on record for the hospitality industry, hotels, motels and convention centers across Illinois are surviving - and in some cases, even thriving - due to their location and their ability to react quickly to changes in strategies of the corporate and leisure travelers since Sept. 11.

Just ask Bob Van Bergen, general manager of Springfield's Crowne Plaza Hotel and Holiday Inn Express. An employee of Destination Hotels & Resorts, which also owns and operates 30 hotels in Washington D.C., San Francisco, San Diego, London and other metropolitan areas, Van Bergen says revPAR - revenue per available room - is rebounding, but that the hotels hit the hardest over the past 18 months were in the upscale, luxury category.

"In the last quarter of 2001, really from Sept. 11 through year's end, revPAR plummeted 18 percent in our industry as a whole," he said. "The worst-performing hotels in 2001 were the high-end hotels, the ones that ironically gained the most from 1998 to 2000."

RevPAR is the common formula used in the hospitality industry to gauge a hotel's overall performance. An average room rate, multiplied by the occupancy percentage, equals the revPAR figure.

"In Illinois, Chicago hotels experienced the biggest fall-off in terms of average rate," Van Bergen said. "They're continuing to feel the pinch. The average rates of these hotels are still down as much as $25 (off the regular room price). Chicago properties, as well as similar high-end hotels in other large U.S. cities, are shifting their focus away from corporate guests and going after the local leisure travelers."

One reason the economy hotels are surviving a stalled economy better, Van Bergen said, is that business and leisure travelers who used to opt for full-service, luxury hotels are scaling back on expenses and cutting out some of the perks.

"The limited service sector, such as the express hotels, is attracting more business right now because people are choosing less expensive products," he said.

The city of Springfield's menu of hotels and motels is increasing at a healthy pace in 2002. Van Bergen said five new hotels will be built in a 16-month period, increasing Springfield's total lodging market by about 15 percent.

A brand-new Staybridge Suites, built by Springfield-based Harold O'Shea Builders, opened in mid June. Adjacent to that new extended stay hotel is a Hampton Inn, currently under construction and scheduled for a Fall 2002 opening.

"From what we've seen in terms of new construction, the hospitality business is strong in Springfield," said Mike O'Shea, owner of Harold O'Shea Builders. "The entire west side of Springfield has witnessed the growth of five or six hotels - some 300 to 400 rooms - just since the early to mid 1990s."

Van Bergen said that although initial year 2002 hotel revenue projections looked fairly optimistic - particularly for the last few months of calendar 2002 - there remains a cloud of doubt as the industry works its way through.

"Meeting planners are definitely back to business," he said. "There's no slow up at all in that market. But corporate business and training-related business is still soft. General hospitality industry projections were that the hotel industry overall would recover by the fourth quarter of 2002, but at this point that is unclear."

Denise Joehl, assistant executive director of Gateway Center in Collinsville, said her convention and meeting space experienced a small degree of reservation fall-out in the first few days following Sept. 11, but long-planned consumer and trade shows remained on the books.

"The immediate impact of Sept. 11 was that the phone just stopped ringing," Joehl said. "Meetings that book two to four weeks in advance, that business, was affected the most in terms of cancellations. But the good news was that our big events, particularly the shows that are on a national schedule, went ahead as planned."

Collinsville's hotels and motels actually experienced a slight increase in room demand in the couple of days directly following Sept. 11, she said, when restricted air travel kept professionals in town a little longer than they had anticipated.

"In an odd way, the tragic events of Sept. 11 actually contributed in part to increased attendance at our consumer shows in Fall 2001," Joehl said. "I think that was because fewer residents were opting to travel on weekends immediately following the terrorist attacks."

Joehl and Van Bergen said that while Illinois' convention business has remained strong lately, the corporate lodging and meeting segment of the state's hospitality economy has proved to be more volatile.