Market History and Forecast for Downtown Chicago

1920’s Chicago had as many rooms as it does now, though many closed by the 1960’s. From then,

new hotels were built, pushing up rates.19

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Historic PerformanceADR Polynomial (ADR) RevPAR

Because of an increase in rooms, occupancies have decreased both at peak and during recessionary periods.

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Historic Inflation Adjusted PerformanceIn. Adj ADR Polynomial (In. Adj ADR)In. Adj RevPAR Polynomial (In. Adj RevPAR)

What’s Changed?

• Chicago itself is doing as well as it ever has in occupancy. Rate is getting better.

• The Metropolitan area is huge. • There are over 109,000 rooms in the metro

area. Chicago CBD has 39,000.• Historically, Chicago sent over 500,000 rooms

into the suburbs per year, or around 120 days.• Now it’s less than 100,000, or 10-20 days.

Changes in the Traveler

• People now stay where they want to.– Corporations are more flexible– There are way more rooms to choose from– The consumer is more informed

• Thanks primarily to the internet

• There are more travelers– Convention has stayed the same, but they’re a smaller

percent (used to be 60%, now 45%). People don’t always stay in the HQ hotel anymore.

– Leisure is a larger percentage (used to be 10% or less, now it’s 15% and growing)

Regional Markets

Why do we think Chicago is going to lose occupancy?

• It’s all room count.

• We’re going to add 20% more rooms to the supply in the next 5 years.

• Demand is still going up, but not fast enough.

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 201830,000

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Room Count Vs. Occupancy 2008-2018Rooms Occupancy

Chicago Forecast

• 2012-13 was the peak of the current cycle.

• Winter sent Occupancy and Rates down Q1 2014.• Supply will take time to be absorbed.

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Weekly data

• Tuesday is the highest rate day, Saturday is the highest occupancy day.– Tuesday is usually corporate and group, at full rack

and is less price conscious.– Weekends are usually packaged rates and

discounts.– This change happened about 5 years ago during

the recession.

Monthly Data

• Historically consistent. May-October are the busy months. November-April are slow.

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Chicago CBD Market Monthly 2011 - 2014ADR RevPAROcc

This YTD is Rough• April

– Occupancy down 2.5%– ADR down 4.5%– RevPAR down 6.9%

• YTD– Occupancy down 4.9%– ADR down 3.8%– RevPAR down 8.4%

• Supply up 5.6% YTD• Demand up 0.4% YTD

New Supply

• 2,800 rooms recently opened or about to open.

• Another 4,800 in the planning stage. More are added almost weekly at this point.

• A lot of conversion from old office buildings.• Neighborhoods are starting to get their own

hotels, generally boutique properties.

New, U C and Proposed HotelsOpened

Early Planning

Advancing