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Old August 1st, 2006, 12:49 AM   #1
samsonyuen
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Detroit...Hotel Building Boom

From: http://www.detnews.com/apps/pbcs.dll...607310360/1001
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Quote:
Monday, July 31, 2006
HOTELOPOLY
As casino hotels go up, Detroit wonders who will win the game of
Louis Aguilar / The Detroit News




Downtown Detroit, a longtime also-ran in the hotel and convention arena, is poised to become a more influential player with the addition of glitzy new casino hotels and restored architectural gems.
About 1,850 new hotel rooms are expected to be ready for overnight visitors by 2008, an increase of 56 percent from current levels. The new construction could affect hotel business from Windsor to Cleveland, according to industry experts.
Area convention officials already are hustling to double the number of citywide conventions in Detroit that could bring in tens of thousands of new visitors each year.
"This opens the doors for us," said Michael O'Callaghan, chief operating officer and executive vice president for the Detroit Metro Convention and Visitors Bureau, which is responsible for drumming up convention business for Detroit and surrounding suburbs.
"We will have the hotel space to accommodate the existing convention space and attract four more citywide conventions of 10,000 to 15,000. Everyone will be able to benefit."
That would be a dramatic turn of events for a city where nearly half of the hotel rooms sit empty for much of the year and whose marquee event, the North American International Auto Show, can't grow because local politicians can't agree on how to expand Cobo Center.
The best-case scenario: The three new casinos-hotels -- the MGM Grand, MotorCity and Greektown -- plus the renovated Westin Book-Cadillac and Pick-Fort Shelby, lift the entire region.
The new hotels, which will increase the number of downtown rooms to 5,155, may attract large meetings and conventions and provide rooms for major events like the NCAA Final Four coming to Ford Field in 2009.
The worst-case scenario: Business doesn't increase, and a glut of rooms drives some hotels out of business.
"It's an interesting experiment," said Charles Skelton, president of Hospitality Advisors Inc., an Ann Arbor hotel consulting firm -- particularly for a city with a 58 percent hotel occupancy rate in May that ranked second-worst among the 25 largest U.S. cities, according to Smith Travel Research.
"I would think convention officials as far away as Toledo, Cleveland, etc., are eyeing this to see how it plays out," he said.
Can hotels fill rooms?
So are those just across the Canadian border.
Casino Windsor is expanding with 369 rooms in a new tower and 100,000 feet of additional convention space. The renovation will be complete in two years.
"We hope it means that the area becomes stronger for international events that will benefit both sides of the border," said Gordon Orr, managing director of the Windsor, Essex County & Pelee Island Convention and Visitors Bureau.
The optimism of local tourism and convention officials isn't shared by all. Even some of the new competition is skeptical Detroit can lure the visitors to fill all those new hotel rooms.
John Ferchill, the Cleveland developer behind the $180 million renovation of the landmark Book-Cadillac, said the project's 67 upscale condos, 31,000-square-foot conference center and 119,000 square feet of retail and restaurant space should do well.
"I actually, candidly, am not as optimistic about the hotel," he said, referring to the 450-room Westin hotel. It's slated to open in 2008.
Market studies suggest the Book-Cadillac will have to take business away from high-end Dearborn-area hotels to survive, Ferchill said.
"What we see is a trend of people who are doing business down here (in the Detroit area) and staying up there (Dearborn area) because there wasn't a, quote-unquote, facility that they will like to stay in.
"This will be nicest hotel in Detroit. Now whether people will go there ..." Ferchill said, then shrugged.
Suburbs ready to compete
No matter how nice the Westin Book-Cadillac will be, some Dearborn hotels say they can compete.
"Although I expect to see some movement (to) downtown, it doesn't mean we cannot replace it by attracting more business," said Pat Trammell, senior director of sales and marketing at the Hyatt Regency Dearborn.
Less than 15 percent of hotel visitors are in town to do business in downtown Detroit, she said. Further, the hotel's 62,000 square feet of convention space is larger than what the Book-Cadillac will offer, she said.
And the casino hotels will attract a different crowd than the Hyatt crowd, she said.
"A large amount of our convention business is in the education area," Trammell said. "I can't see them wanting to stay in a casino to do business. They may want to go there on their free time, but that's a different issue."
A Troy-based hotel consultant agreed that suburban and city hotels can benefit from a stronger downtown Detroit.
"It's not a zero-sum game," said Ron Wilson, chief executive officer of Hotel Investment Services Inc.
"If two out of five people who usually stay in the suburbs now stay downtown, it doesn't necessarily mean you will have only three people left in the suburbs," he said. "It's been shown (in previous studies) that in order to spur hotel growth, you need to add hotels."
Cobo poses dilemma
Wilson said the additional downtown hotels get Detroit out of its "Catch-22": The city can't expand Cobo Center and lure more conventions because it lacks hotels, and it lacks hotels because it can't expand Cobo and lure more conventions.
The planned $663 million expansion of Cobo is being stalled by political wrangling between the city and suburbs.
Cobo is the home of the North American International Auto Show, which generates close to $600 million in economic impact for the region.
But other cities, most notably Chicago, are trying to upstage the Detroit auto show by offering larger facilities that are less expensive for exhibitors.
But even without an expanded Cobo, the additional hotel rooms mean Detroit can go after convention business it couldn't get before, said O'Callaghan of the Convention and Visitors Bureau.
"We've conducted a lot of studies; something like 85 percent of conventions can actually fit into that floor space" at Cobo, O'Callaghan said.
Beyond the regional conventions and midsize association shows, analysts say the new downtown rooms can help sell the region for splashier events, such as a national political convention.
Existing hotels step up
Some of the hotels downtown are already stepping up their game. The Hotel Pontchartrain is undergoing a $12 million renovation that should be completed by end of year. It will be renamed the Sheraton Pontchartrain to reflect its partnership with the national hotel chain.
"We could all benefit from this," Pontchartrain general manager Todd Roesler said of the new hotels.
"The Convention and Visitors Bureau is doing a great job in scrubbing up potential business."
While the new casino hotels are not likely to attract many business travelers -- "I can't see (a) corporate executive in town to do business with GM staying there," said Skelton, of Hospitality Advisors -- they will win over out-of-town gamblers and more socially oriented conventions, such as the regional meetings of the Order of Eagles.
"It's all pieces of the puzzle to make downtown better," said Skelton, noting there are still pieces that must fall into place.
"Can we attract enough business who feel safe downtown? Are there enough things to do downtown? It's yet another big test for downtown."
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