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As downtown Milwaukee’s hotels shift from the busy summer season to the fall and winter months, industry experts see a mix of dark clouds and bright spots on the horizon.
Milwaukee was not spared from the economic calamity brought on by the COVID-19 pandemic last year. But the summer of 2021 brought life back to the local hotel market, thanks to the return of leisure travel.
Greg Marcus, chief executive officer of Milwaukee-based Marcus Corp., said his company’s hotels returned to near-2019 levels this summer, after taking a big hit for much of last year.
Marcus Corp. owns three downtown Milwaukee hotel properties, including Hilton Milwaukee City Center, the Pfister Hotel and Saint Kate-The Arts Hotel. They benefitted from major sports events, such as the Bucks’ NBA championship run and the Ryder Cup, as well as the return of small events like weddings.
But the company is also expecting the usual seasonal slowdown of business in the coming months, which could be further compounded by a continued absence of business travelers.
“In a way, we’ve seen some recovery,” Marcus said during a recent Milwaukee Press Club event. “But now we’re not going to see as much recovery as you go into the fall and into the winter because we’re not going to have the business travelers.”
Milwaukee hotels usually turn their attention to business travel at this time of the year. But COVID-19 – and more recently the delta variant – is still keeping them away.
“What’s been going on with the delta variant, many businesses large and small alike have postponed their return to office, which has given less reason for a business traveler to go and make a sale, (or) catch up with a customer if that customer is not going to be in the office,” said Doug Nysse, a hotel industry expert and director of project and development services at Colliers | Wisconsin.
Prevailing industry thinking is that corporate travel, once expected to return in a meaningful way by fall, may be pushed back toward the beginning of 2022, said Greg Hanis, hotel industry analyst and president of New Berlin-based Hospitality Marketers International Inc.
This may be acceptable for markets where the weather is warm and hotel demand doesn’t slow in the winter, but it could mean Milwaukee won’t see any real increase from that market segment until late spring.
“I think that’s going to be a real big question mark for the hotel (industry) recovery,” Hanis said.
A review of hotel industry data shows downtown Milwaukee hotels are filling more rooms than last year but are still lagging pre-pandemic levels.
According to market data from Hendersonville, Tennessee-based STR Inc., downtown hotels were between 50% and 60% occupied from early August through the week of Aug. 29-Sept. 4.
That’s a way off from the same period of 2019, during which hotels were at least three-quarters occupied, minus the beginning of September (66%). But it was an improvement from 2020 numbers, when occupancies were in the 30% range.
Hanis also found another positive in the market data. Average daily rates, meaning the price hotels are charging for overnight stays, were about the same or even higher in some weeks relative to 2019.
Average daily rates between August and early September hovered between $150 per night to nearly $174. This compares to 2019 rates that ranged between approximately $153 and $167.
This trend can be observed nationally, and it shows hotels were confident enough in the market to keep rates high, Hanis said.
“As a result, revenue may not be down as much as occupancy would be if they had discounted rates,” he said.
Also impacting hotel business has been a shortage of workers, which has led hotel operators to make tough decisions about their operations, Nysse said.
“What hoteliers are looking to do is both reduce labor costs by reducing employees through eliminating or removing amenities,” he said.
Reduced services could take the form of less frequent room cleanings or suspending certain food and beverage offerings.
As the warm weather recedes, and leisure travel with it, Hanis summarized the hotel market this way:
“The skies have turned cloudy, but we don’t know if there’s a rainstorm coming or if it’s just a cloudy day, and we’ll have to work through it in the fall,” he said. “We don’t know the true long-term effect.”