Newsletter - May 1, 2002

CHICAGO REPORT   -  2002 NATIONAL LODGING FORECAST 

Ernst & Young PPL

Introduction

Although Chicago has experienced two consecutive years of declining occupancy and ADRs, it is anticipating a relatively strong rebound from the events of September 11. As an indication of Chicago’s resilience, during the Gulf War, Chicago was one of the top three cities that outperformed the broader market. Similarly, immediately following the terrorist attacks, Chicago’s market rebounded from an occupancy of 29 percent the week of September 16 to over 70 percent only two weeks later. 

Furthermore, the McCormick Place Convention Center, which had its first major trade show only three weeks after September 11, experienced only a small decrease in attendance when compared to the same period the prior year.  Chicago continues to be a primary market for corporate headquarters and relocations due to its amenities, urban sophistication, and top-rated infrastructure. 

Its centralized location also allows business travelers and tourists to be within a half-day’s trip to and from most other major cities in the continental United States, a big selling point to the group and convention markets. Boeing is the latest addition to Chicago’s already large list of corporate headquarters, including Sears, Motorola, McDonalds, and United Airlines.

Chicago Report

Source:Smith Travel Research,Ernst &Young LLP

In 2001, the overall Chicago market occupancy is anticipated to reach 62 percent, approximately an eight-point decrease from 70.4 percent in 2000. For 2002, an increase of approximately three occupancy points is anticipated, to an estimated 65 percent. Average room rates are anticipated to be $112 in 2001 showing a decrease from the $117 ADR registered in 2000. For 2002, an increase to approximately $115 is anticipated

Major Demand Changes

Lodging demand has seen a slight decrease due the slowing economy, but should hold relatively constant with the city’s full schedule of conventions and festivals. The planned addition to McCormick Place Convention Center will increase its size by more than 800,000 square feet, making it one of the largest convention facilities in the U.S. at approximately three million square feet. 

The driving force behind this expansion is its current inability to attract additional conferences and trade shows, as the center is continually sold out. Some of the more significant annual festivals include “Taste of Chicago” with more than 3.5 million visitors, the Air & Water Show with 2.2 million attendees, and the Jazz & Blues Festival with 900,000 combined visitors.  Soldier Field, home of the NFL Chicago Bears, has recently been approved for a $587 million renovation. 

This upgrade, scheduled for completion in early 2004, calls for additional seating as well as an increase in the amount of public parkland around the stadium. Additionally, Wrigley Field is anticipated to be improved with increased upper deck seating and 65 new skyboxes. These renovations should increase the number of fans, currently 7.5 million annually, that Chicago’s sporting environment draws to the city.

Major Supply Changes

More than 1,295 rooms were added to Chicago during 2001, increasing total supply to approximately 29,000 rooms. Several major hotels opened including a 455-room Embassy Suites, a 311-room LeMeridien Hotel, a 189-room Fairfield Inn, and the 340-room Peninsula Hotel. Currently, one major project is under construction, the 415-room Hotel Sofitel, which is scheduled for completion by mid 2002.  

Although this new lodging inventory represents an increase of almost five percent of total available rooms, industry representatives feel that the market should absorb this inventory without creating any significant negative impact.  While Chicago’s new project pipeline is robust, an uncertain economy and the events of September 11 may cause many planned projects to be postponed or cancelled. 

The city has six properties with more than 3,200 rooms planned for construction over the next two and a half years, including a 385-room Hard Rock Hotel, a 357-room Marriott, a 410-room Hilton, and an Adams Mark Hotel with approximately 1,600 rooms. Chicago is also experiencing a significant amount of hotel renovation, with more than 10 hotels and 1,500 rooms currently undergoing or planning renovations.  

The largest of these projects is the $70 million renovation of the Hotel Intercontinental in downtown Chicago

Political/Economic/Legal Changes

Chicago continues to invest in infrastructure, strong neighborhoods, good schools, and the creation of a vast array of cultural and recreational attractions to further stimulate economic development. The city is currently implementing a long-term program to improve the Chicago Public School System as well as its police and fire departments. 

Expansions are taking place along Chicago’s lakefront with 17 additional acres of new parks. Chicago continues to promote its competitive economic incentives to attract new industries and, in an effort to stimulate tourism, it is undertaking a citywide campaign called “Make It Chicago,” involving a large number of restaurants, hotels, and theaters offering attractive discounts.

Chuck Bedsole, Dallas
Skip Perry, Chicago
ERNST & YOUNG
www.ey.com/us

THE CORNELL HOTEL SCHOOL NAMES NEW GENERAL MANAGER OF STATLER HOTEL

David W. Butler, Dean of the School of Hotel Administration announced today the appointment of Richard Adie, SHA Class of '75, as the new General Manager of the Statler Hotel. Mr. Adie was the unanimous choice of the search committee to lead the Hotel in achieving excellence in its facilities, quality of service, and in the programming and training of its staff and students. He will begin his new position on July 1, 2002.

Upon earning his BS Degree from the Hotel School in 1975, Mr. Adie embarked on an impressive 27-year career with Hyatt Hotels. During the early stages of his career, he served with Hyatt as a Management Trainee, and in front line management roles in Housekeeping, Stewarding, Front Office, Restaurant, and as an Executive Assistant Manager of Rooms.

In his first appointment as a General Manager in 1983, he opened the Hyatt Regency West in Houston. His success as an Opening GM earned him the opportunity to open two more Hyatt properties in Denver and San Francisco. In 1990, he served as GM of the renowned Hyatt Regency in Chicago and moved to his current appointment with the Hyatt Regency Crown Center in Kansas City in 1993.

Mr. Adie has an exceptional record of achievement with Hyatt. Under his leadership, the Hyatt Regency Crown Center in Kansas City achieved top tier convention hotel status within Hyatt, as evaluated by the Gallup Organization. Other achievements under his tenure as General Manager include AAA 4 Diamond and Exxon/Mobil 4 Star status, one of only three hotels in the State of Missouri to earn these designations. He has also been recognized as Hyatt Hotels’ General Manager of the Year. The depth and variety of his experience will be invaluable in molding the future success of the Statler teaching hotel as a pivotal component of the student's experience at the Hotel School.

Today's School of Hotel Administration is the most sophisticated service-oriented management school in the world. The Hotel School is home to 850 undergraduates from the United States and 42 countries, 120 graduate students (master's and Ph.D. degrees), and more than 1,700 industry professionals from 90 countries enrolled in executive education. Each year more than 250 industry leaders visit Cornell to lecture, confer, and offer guidance to our students. More than 100 hospitality companies recruit our students for full-time and summer employment. The Hotel School and the modern 150-room teaching hotel, the Statler Hotel and Conference Center are located in the heart of Cornell University's beautiful Ivy League campus.

With 60 full-time teaching faculty, the Cornell Hotel School has the world's largest group of scholars focused on hospitality service-oriented management. As a result of our industry outreach programs and the School’s unique Partners in Learning relationships with the hospitality industry and the teaching Hotel, the Cornell Hotel School is the hospitality industry's think tank. 

STARWOOD PREFERRED GUEST WINS HOTEL PROGRAM OF THE YEAR

For the third year in a row, frequent travelers have named Starwood Preferred Guest(R) the number one hotel loyalty program in the world.

Starwood Preferred Guest was voted Program of the Year in both America and Internationally during the 14th Annual Freddie Awards, one of the most prestigious honors in the travel industry. Launched just three years ago, Starwood Preferred Guest also took top honors for Best Customer Service in America and Internationally, Best Award Redemption in America and Internationally, and Best Elite Level Program in America and Internationally, Best Website and Best Newsletter.

Every year the Freddie Awards recognize the best loyalty programs in the world. The awards are voted on by frequent travelers via  Insideflyer magazine and an Internet survey, giving those who travel most the opportunity to voice their opinions on favorite airlines, hotels and credit card loyalty programs.

Travelers have once again lauded Starwood Preferred Guest for the program's continued efforts to aggressively reward and recognize its members. The program made headlines when it launched in 1999 with a breakthrough policy of no blackout dates and no capacity controls, meaning members can redeem free nights anytime, anywhere. Starwood Preferred Guest members have also cited the program's hassle-free award redemption, outstanding customer service, and innovative promotions and benefits for elite members.

The program boasts an unrivaled portfolio of hotels and resorts which includes some of the world's most celebrated hotel brands: St. Regis, The Luxury Collection, Westin, Sheraton, W Hotels and Four Points by Sheraton. Starwood Preferred Guest also offers members the ability to redeem awards at more resorts, more luxury properties, more European hotels and more golf properties than any other hotel program, which has proven to be a big draw for the world's most frequent travelers, and a significant competitive advantage.

Some of the renowned hotels and resorts in Starwood Preferred Guest's portfolio include the St. Regis Monarch Beach in Dana Point, California, The Phoenician in Scottsdale, Arizona, The Westin La Cantera in San Antonio, Texas and Hotel Danieli in Venice, Italy.

Starwood Preferred Guest is honored to receive this award on the heels of its third birthday, said Jim Berra, vice president, loyalty marketing for Starwood. When we launched the program, we took the industry by surprise with our generous awards, rich promotions and hassle-free redemption. During the last year, we focused on increasing the flexibility and generosity of our awards while also introducing a new website, improving our customer service, and enhancing the recognition we provide to our elite members.

We believe these benefits combined with the exclusive, popular offers we make available to our members like 1K Per Day, Cash & Points Awards, Private Sales and Free Weekends Worldwide helped make us the number one hotel loyalty program in the industry.

Recognized with the Freddie Awards' Program of the Year three years running, Starwood Preferred Guest opens the door to some of the world's best hotels. Key business destinations around the globe are covered, and leisure opportunities are endless with more than 125 world-class resorts and over 2,700 holes of golf worldwide. In addition, Starwood has the most hotels of any company recognized on the recently announced Conde Nast Traveler Gold List.

BIKINI BAN HITS MALAYSIAN TOURISM INDUSTRY

Tourism in Malaysia has started dropping off after one state banned holidaymakers from wearing bikinis. The Terengganu state government also segregates men from women at swimming pools and in hotels.

Malaysia's tourism minister Abdul Kadir Sheikh Fadzir says he is disappointed over the decision by the Islamic state government. He revealed many European tourists had cancelled trips to Malaysia because of the announcement.

He told the New Straits Times: "Yesterday, I received a fax from a Malaysian tourism officer overseas who said many tour agents have been asking if it was appropriate to send tourists to Malaysia because of this. "Whether they want to swim with their husbands or wives or want to wear bikinis or just enjoy under the sun on the beach, they have the right to do so. We cannot force them to follow the way we think."

Since the Muslim opposition party took over in Terengganu, it has banned karaoke outlets, pubs, unisex hair salons and gaming outlets.