Marriott will shake up downtown hotel market

The downtown Milwaukee hotel market will gain a major competitor in mid-2013, when a new 200-room, full-service, Marriott hotel opens.

The 729-room Hilton Milwaukee City Center, 481-room Hyatt Regency, 307-room Pfister and 221-room InterContinental hotels will have to compete with the new hotel to maintain their market share.

A “wall-smashing” ceremony was held recently to celebrate the start of construction for the Marriott project. The hotel will be built around the Johnson Bank building, located southwest of Wisconsin Avenue and Milwaukee Street. Five buildings on the site will be demolished, except for the historic Wisconsin Avenue façade, which will be preserved and restored.

The Marriott will be the first new full-service hotel built in downtown Milwaukee since the Wyndham in 1998, which was converted into an InterContinental hotel in 2006. Other new hotels that have opened downtown since then have been limited service hotels.

“A new (full-service hotel) property for downtown Milwaukee is going to be an attraction,” said Greg Hanis, president of New Berlin-based Hospitality Marketers International Inc., a hotel industry consulting firm.

New hotel buildings have advantages over older hotels, no matter how many upgrades are made to older properties, Hanis said. For example, older hotels typically have smaller rooms, especially the bathrooms, than customers are used to at newer hotels, he said.

“With a new product you have a chance to integrate all of the new conveniences, amenities and modern design,” said Jon Peck, chief operating officer of White Lodging Services Corp., which will manage the hotel’s operations.

Older hotels can offer a different experience than a new, modern hotel, which appeals to some guests.

“The Pfister offers a historic, nostalgic-type of experience,” Hanis said. “The Marcus Corp. does a good job taking care of it, but it is a property that needs constant maintenance.”

The developers for the Marriott project promise to provide a high level of amenities, including: 9,000 square feet of meeting space, a 5,000-square-foot restaurant with seating for 100, a 1,000-square-foot fitness center, an indoor pool and a concierge lounge.

The concierge lounge will be available exclusively for guests staying in upgraded rooms or members of the Marriott Rewards loyalty program. Breakfast, coffee and hors d’oeuvres will be served in the concierge lounge.

Also, Milwaukee jeweler Schwanke-Kasten plans to open a store in the hotel.

Plans for the Marriott include a sleek lobby space, which will include areas for guests to work by themselves and other areas, including a bar, for people to gather in groups. The lobby is an important amenity, Peck said.

“(Hotel guests) are spending less time in their rooms these days and more time in the lobby and public areas,” he said.

Jackson Street Management LLC, the development group for the Marriott project, has described it as a “four star” and “world class” hotel.

However, Hanis said a full-service Marriott hotel is generally considered an “upscale” hotel in the same class as the Hilton, Hyatt and Pfister hotels, but a step below a “luxury” hotel like the InterContinental.

Another competitor will be the 100-room Iron Horse hotel, a boutique luxury hotel located south of downtown.

“I’m not sure (the Marriott) is going to be better than what Milwaukee has,” Hanis said.

A “luxury” hotel has a higher level of appointments, finishes, room quality and customer service that provides a greater experience than an “upscale” hotel, Hanis said.

“A lot of (the difference) is touchy-feeling stuff you can’t put a real hard value on,” he said.

In its management of the Marriott, Merrillville, Ind.-based White Lodging Services will, “provide lodging, hospitality and entertainment at a new level to our city,” said Ed Carow, managing partner for Jackson Street Management. White Lodging has a portfolio of about 160 hotels and more than 100 of them are Marriott properties.

“They are very experienced in the hotel industry,” Hanis said. “They bring a very high level of management experience to the property.”

The Marriott project begins as the downtown Milwaukee hotel market is posting a strong recovery from the Great Recession. For the first 10 months of the year downtown Milwaukee hotels had an occupancy rate of 67.9 percent, the highest since 2008 when occupancy was at 68.2 percent for the first 10 months of the year, according to Hendersonville, Tenn.-based Smith Travel Research.

The downtown hotel market peaked in 2008, but then it collapsed during the last two months of that year and through 2009 during the recession. With a decent finish to 2011, the downtown hotel market should outperform the 2008 high-water year.

The total number of downtown hotel rooms sold during the first 10 months of this year was 722,598, up 6.7 percent from the 676,926 sold for the same portion of 2008. However, the 2011 average daily rate ($121.24) and revenue per available room ($82.31) for the downtown hotel market trails 2008 levels ($126.70 ADR and $86.41 RevPar). Still, occupancy, ADR, RevPar and demand are all showing improvement this year for the downtown hotel market compared to 2009 and 2010.

In addition to the Marriott, two other hotel projects are planned in downtown Milwaukee as hotel developers take notice of the market’s improving performance. Rosemont, Ill.-based First Hospitality Group plans to convert the 125-year-old Loyalty Building at 611 N. Broadway in downtown Milwaukee into a 128-room Hilton Garden Inn hotel. Oregon, Wis.-based Gorman & Company recently began construction on a $19 million project to transform the former Brew House building and Mill House building, located at the former Pabst brewery complex in downtown Milwaukee, into a 90-room independent hotel called Brewhouse Inn & Suites.

A new hotel does not necessarily divide up the existing market share into smaller pieces, Peck said. The RevPar in the downtown Indianapolis hotel market increased after a JW Marriott hotel opened there because the hotel attracted more Marriott customer to that market, he said.

But a new full service hotel that has a strong brand like Marriott with a national reservation system and rewards program will be a formidable competitor to downtown Milwaukee’s existing full-service hotels, Hanis said.

“I think it’s going to steal (market share) from all of those,” he said. “Every one of them is vulnerable to the Marriott.”

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