|Westin Hotels & Resorts is set to open during spring 2013 in downtown Cleveland.
CLEVELAND—While the Industrial Revolution has come and gone, many Rust Belt cities have struggled to maintain relevancy in an ever-changing hotel environment.
Cleveland, for one, is attempting to add new development and attractions to lure more travelers—and hotel investors along with them—to the once-thriving city.
New projects in downtown Cleveland include the Horseshoe Casino Cleveland, Cleveland Medical Mart & Convention Center, Greater Cleveland Aquarium and the Flats East Bank project, a $500-million waterfront development opening in spring 2013 that will include restaurants, apartments, nightclubs and the 150-room Aloft Cleveland Downtown by Starwood Hotels & Resorts Worldwide.
Starwood also plans to convert a former Crowne Plaza to the Westin Cleveland Convention Center, scheduled to open during summer 2013 after a $64-million renovation. Other new additions to the city’s hotel supply include a project from Kimpton Hotel and Restaurant Group LLC and a Courtyard by Marriott.
March data from STR, parent company of HotelNewsNow.com, show the Cleveland hotel market has 184 properities with 20,899 rooms.
“There’s a tremendous amount of excitement (in Cleveland),” Leonard Clifton, GM of the DoubleTree by Hilton Cleveland Downtown-Lakeside said. “I think there’s a tremendous amount of buzz around the city right now.”
Still recovering from the economic recession in 2008 and slowly regaining its footing, Cleveland has proved a difficult—albeit resilient—market to enter.
“Cleveland is a bit more of a challenging market for us,” said Timothy Osiecki, executive VP of development and facilities for Concord Hospitality, which just broke ground on a $27-million, 150-room full-service Courtyard by Marriott at University Circle, across from University Hospital’s main campus, east of downtown.
“It has started to recover, but not as quickly as the other markets,” he said. “But it’s certainly on the mend.”
Osiecki said part of the appeal of entering the Cleveland market were the tax credits the company received for developing the eight-story “very urban and very upscale” hotel. Osiecki declined to identify the terms but did say they were a “critical” part of the financing.
There are various tax rebates and tax credits, Joe Long, executive VP of acquisitions and development for Kimpton, said about developing in Cleveland. But, he added, “Cleveland is one of those cities where we’ve always felt a product could be supported by the market. Comparable-sized cities lack underlying operating fundamentals, he said.
Kimpton plans to manage its 161-room boutique hotel—the first of its kind in Cleveland—which will open in 2013 and will be housed in the historic Schofield Building in the city’s Playhouse Square district.
The challenges in Cleveland are the same as anywhere, Long said. “There’s a risk,” he said. “The plus side of that—the opposite side of that—you’re really creating something special.”
An attractive element to being on the cusp of the Cleveland revival is transforming a “beautiful old building and taking something fresh and new and have it become iconic in the city,” Long said.
Jennifer Kulczycki, communications director for casino developer Rock Gaming is optimistic about Cleveland’s prospects as well, especially as new projects continue to draw attention to Cleveland. Three years ago, she said, occupancy in Cleveland hovered below 50%, but in recent months, she said, it’s been in the high 50% and 60% range.
According to data from STR, Cleveland’s occupancy in March was up 2.9% to 55.6%, average daily rate increased 1.6% to $86.36 and revenue per available room increased 4.5% to $48.
Rock Ohio Caesars, a joint venture between Rock Gaming and Caesars Entertainment Corporation, won approval from Ohio voters in 2009 to build the casino but decided to do so without a hotel because of Cleveland’s already low occupancy levels, she said.
Recently, though, Rock Ohio Caesars acquired the 205-room, 4-star Ritz-Carlton and an attached five-story commercial office building adjacent to the casino for $36.5 million.
“The building in which The Ritz operates was an unanticipated opportunity that came about,” Kulczycki said of the long-term contact Ritz has with the building.
The opportunity includes creating a partnership between Rock Ohio Caesars and The Ritz to offer a rewards program for casino guests who frequent the casino, she said.
The company has no plans to reflag the property, she added
The Horseshoe Casino, located in downtown’s Higbee Building, is expected to bring in 5 million additional visitors alone, Kulczycki said.
The first quarter showed good performance for Cleveland’s hotel scene, Clifton said. Transient and group business are coming on strong, he added.
Clifton credits this surge in demand to having 600 rooms out of the market with The Crowne Plaza and The Holiday Inn Express both down for conversions and renovations.
Working with Starwood to introduce the Westin property into the Cleveland market by spring 2013, Alexandra Walterspiel, senior VP of operations for premier and lifestyle hotels at hotel management company Sage Hospitality, said Cleveland’s commitment to revitalizing the city makes it an attractive market.
“We’ll be a convention hotel because of our location and the relationships we’re establishing,” she said of the $64 million renovation of the former Crowne Plaza, which is adjacent to the Cleveland Medical Mart.
Alexandra Walterspiel, senior VP of operators for premier and lifestyle hotels, Sage Hospitality
“It’s an up-and-coming city, and we see amazing opportunity there. And we want to be a part of it,” she said.
The 484-room Westin, Walterspiel said, will welcome leisure travelers and Cleveland dwellers with its spa and Urban Farmer restaurant. “We want to make people want to come and hang out with us on the weekend.”
The lack of boutique product in Cleveland will help Kimpton’s hotel stand out, Long said.
Kimpton, he said, attracts both group and leisure travelers, as well as guests coming from feeder markets such as Chicago. “Usually we can outperform the market when those things are happening.”
After developer CRM Real Estate approached Kimpton to manage the conversion and after seeing the building, Long said, entering the Cleveland market “was a little bit opportunistic.”
“It was a great building for conversion to a hotel. It was at that point that we started paying attention to the details in the market … and we thought the market could support our type of property,” he said. “Now’s the time to go to Cleveland.”