Three years after the COVID-19 pandemic crushed the hotel industry, resulting in well over $100 billion in lost revenue, things are looking better — nationally, that is.
In Milwaukee, that’s not exactly the case.
“Milwaukee is hurting,” said Greg Hanis, hotel industry analyst and president of New Berlin-based Hospitality Marketers International Inc.
While an increase in tourism has given the downtown hotel market a boost, the loss of business travelers has weighed heavily on the city’s hotel properties.
Hotel occupancy in downtown Milwaukee was around 66% for the first four months of 2019, compared to 50.7% for the same timeframe this year, according to data from Tennessee-based STR, a hospitality data and analytics company.
That’s behind where the industry is nationally, according to Hanis.
But this comes as Milwaukee and Wisconsin saw a record year of tourism in 2022, having a $6 billion impact on the greater Milwaukee economy, according to the state Department of Tourism. Further, the city recently celebrated the opening of The Trade, the first full-service hotel to open in more than four years in downtown Milwaukee, with two other hotels proposed in the area as well.
“I always rate the hotel developers as either seeing the glass half full or half empty,” Hanis said. “Right now, hotel developers see the glass two-thirds full.”
Things are trending in the right direction. The downtown hotel market closed out 2022 with an average of 56% occupancy for the year, much better than the 32% occupancy in 2020 when the pandemic devastated the industry. Average room rates in 2022 were up from 2019 by about $10, according to STR.
“The hoteliers have been a little bit more aggressive with their rate, so they’ve been increasing the rate to make up some of the difference,” said Hanis, noting that inflation is also part of the formula.
The rate increase has paid off. Revenue in the downtown Milwaukee hotel market has also nearly returned to pre-pandemic levels, with April’s year-to-date revenue only about $300,000 shy of April 2019.
Still, it’s a slower recovery than the hotel industry has seen nationally. Part of the problem is who is coming to Milwaukee and who isn’t.
There are three primary markets for hotels: the social/leisure traveler, or tourists; the corporate/commercial traveler, or business traveler; and the group market, made up of the former two categories booking rooms on a larger scale.
A record 111 million visits to Wisconsin in 2022 indicates that tourists have returned. However, it’s not guaranteed that these tourists will keep coming back as the novelty of post-pandemic travel wears off, and inflation could discourage some from booking vacations in the future, Hanis said.
A key feature of the post-pandemic hotel industry is the absent business traveler, Hanis noted, which is keeping hotel occupancy from reaching pre-pandemic levels.
Business travelers, whom hotels rely on to fill rooms during the week and, in Milwaukee, during the winter months, were forecasted to return last fall, but that didn’t happen, Hanis said. Rather, the group market has come back stronger than the corporate/commercial market has thanks to a return of conventions and festivals in 2022 and 2023.
With the 2024 Republican National Convention taking place in Milwaukee next July — bringing an estimated 45,000 visitors, nearly $200 million economic impact and significant media exposure to the city — Milwaukee hotels will see a surge in group market travelers next year.
In Milwaukee, the convention market hasn’t been as strong as in other cities due to limited nonstop flights from major metros and a lack of large hotels.
The largest hotel property downtown is the Hilton Milwaukee City Center with 729 guest rooms and suites, followed by the Hyatt Regency with 481 rooms, Potawatomi Casino Hotel with 381 and The Pfister Hotel with 307. After that, downtown only has smaller hotels with 250 rooms or less.
“For major conventions, those are not attractive hotels,” Hanis said.
But those are the types of hotels that Milwaukee is seeing more of. In May, the 205-room Trade hotel opened in the Deer District; The Tempo hotel is proposed in the Westown neighborhood, with 161 rooms, and a third hotel, with 130 rooms, has been proposed near Brady Street.
“Right now, the demand isn’t there (for more hotels in or near downtown Milwaukee),” Hanis said, given the numbers.
New hotels, though, could alter where people stay when they visit the city.
“These new hotels are going to strip demand away from existing hotels,” Hanis said. “The existing hotels that are the main bread and butter of Milwaukee are going to be sitting there and going, ‘Oh man, what do I do? Do I lower my rates? What do I do to try and attract people back?’”
Some of the city’s existing hotels have already felt some turbulence coming out of the pandemic. The Iron Horse Hotel, one of Milwaukee’s few independent, locally owned hotels filed for bankruptcy in June 2022, citing the impact of COVID-19. The Hampton Inn & Suites in the heart of downtown abruptly shut its doors in early May, saying it was closing for renovations but hasn’t provided any timeline or details on the project.
“New hotels are great, they add excitement to the area, but for existing hotel operators there’s still some frustration with getting back to 2019 levels,” Hanis said. “2019 is the benchmark. We’ll know when we’ve recovered when we come back to 2019 levels.”
