Milwaukee cashes in on unique appeal
15 JANUARY 2014 7:01 AM
All indicators point to a healthy Milwaukee hotel market for 2014, but local operators agree a saturation point might be looming.
MILWAUKEE—A resurgence in business travel, a spike in meetings and convention business, and a season-long string of festivals drove Milwaukee hotel performance above U.S. averages in 2013. But hoteliers in the region say they are worried developers will add supply based on those unsustainable demand jolts.
The first factor contributing to Milwaukee’s health, a resurgent business travel market, can be attributed to the fact that a number of dynamic enterprises are headquartered in the city, including Harley-Davidson, Johnson Controls, Northwestern Mutual Life and ManpowerGroup.
Adding to the market mix has been strong summer business generated by a season-long string of local festivals, including the 11-day Summer Fest, and an ongoing revitalization of downtown and its outlying neighborhoods.
Facts and figures
According to STR, parent company of Hotel News Now, year to date through November, Milwaukee's occupancy was 63%, up 4.3%. Average daily rate was $96.84, up 4.9%. Revenue per available room was $60.98, up 9.4%.
Based on all available data, Milwaukee qualifies as a healthy, dynamic market, said Jan Freitag, VP of global development for STR.
"There is some pricing power in the market," he said. "You see that from the ADR numbers for the last three years, because they have increased at a healthy rate each year."
Drivers and trends
Milwaukee is a leisure-oriented market in the summer. During the winter and spring, a solid corporate market base sustains downtown hotels.
The city's past as a brewing capital has been an important factor in the success of one of its newest hotels, the 90-room, extended-stay Brewhouse Inn & Suites, opened last April on the iconic site of the former Pabst Blue Ribbon brew house.
But the wild card that keeps the city's hotel business churning is meeting and convention business, which was strong for 2013. A key driver last year was a pair of major conventions that bookmarked the summer season over Memorial Day and Labor Day weekends, said Tim Smith, GM of the 220-room InterContinental Milwaukee, owned and managed by Marcus Hotels & Resorts. Marcus also operates the 730-room Hilton Milwaukee City Center connected to the Wisconsin Center convention complex and the 307-room Pfister Hotel, a landmark independent property.
"Those were the International Moose Convention in May and the 110th anniversary celebration and convention held by Harley-Davidson over Labor Day weekend," Smith said. "Those typically are times when the city is not busy, so those events really helped our numbers for May and September."
At the same time, Peter Northard, GM of The Brewhouse Inn & Suites, said corporate business has been unusually strong as U.S. economic recovery continues and locally based companies generate more inbound transient business travel.
In addition to Summer Fest, the city's biggest event of the year, major attractions for the other nine months of the year include the Milwaukee Art Museum, Harley-Davidson Museum and Marcus Center for the Performing Arts, which features a resident symphony orchestra and opera company.
In addition to beer, Milwaukee visitors are finding a new foodie scene as well. Over the past two years, a number of restaurateurs and chefs have migrated to Milwaukee from the Chicago area and opened new, critically acclaimed eateries that are creating new buzz, said Sean Skellie, VP of business analysis and partner at IDM Group. IDM manages two Milwaukee properties: the mixed-use, 180-unit Plaza downtown, with 80 rooms, and the 20-room boutique The Clarke, in the suburb of Waukesha.
The Plaza has capitalized on the trend with its own Cafe at the Plaza restaurant. Smith agreed that the addition of eight important restaurants has been a driver of the city's leisure business from within Wisconsin.
Three new hotels—a Hilton Garden Inn and a full-service Marriott, both located downtown, plus The Brewhouse Inn & Suites—have opened in the past year.
Scheduled to open in the fall of 2014 is the $150-million, 381-room hotel that will be connected to the Potawatomi Bingo Casino, which is owned and operated by the Forest County Potawatomi Community.
Additionally, Kimpton Hotels & Restaurants announced in early 2013 that HKS Holdings plans to develop an eight-story, 158-room Kimpton downtown.
While local hoteliers are enthusiastic about recent market trends and the numbers they have generated, sources said they are concerned about a saturation point that might be on the horizon.
"I think we're getting to the point where you're going to see a saturation," Northard said.
"The Brewhouse and the new Marriott came online this year in the late spring and summer, when we were getting into our high season," Smith said. "So I don't think the existing hotels really noticed that extra inventory in the market, because the market was so healthy. But I think what everyone now is so fearful of is that as you get into January, February and March, and demand slows down, that's really when we're really going to feel the new inventory, because the pie is just getting cut up into too many pieces."
Slices of that pie will get even smaller with the much-anticipated debut of the bingo casino hotel, Smith said. "I think that hotel has everybody nervous, because that is a lot of rooms to add to the market."
Skellie echoed those sentiments.
"We do a lot of market analysis," he said. “And I don't think demand is going to be able to keep up with and absorb the increased supply."