CHICAGO? Chicago?s luxury hotel market will expand when The Peninsula Chicago opens in the first half of 2001. The 336-unit will be a joint venture between The Hongkong and Shanghai Hotels Limited? which owns and manages the Peninsula hotels? and a partnership of Thomas J. Klutznick Co. and Himmel and Co. The 18-story tower housing the new hotel will sit above an upscale retail complex on Chicago?s toney North Michigan Avenue. Occupancy rates for Chicago?s luxury hotel market have been performing slightly above Chicago?s overall hotel market (see chart), a direction which reflects the national trend for U.S. urban cities, said Robert Mandelbaum, research director for PKF Consulting. ?Luxury properties have been performing better than the overall marketplace,? he said. ?It?s a more insular market because there has not been a lot of new product, the economy is good, and the ability for people to pay is there,? he noted. A spokesman for The Hongkong and Shanghai Hotels Limited said the 336-unit Peninsula Chicago will serve as a nice bridge between The Peninsula New York, The Peninsula Beverly Hills and Quail Lodge Resort & Golf Club in Carmel, CA. The Hongkong and Shanghai Hotels Limited in the past year has debuted The Peninsula Bangkok and reopened The Peninsula New York, which was closed after a 10-month renovation. PKF?s Mandelbaum said opening a new Peninsula property in the United States is a good way for a foreign hotel company to globally expand its brand. ?Peninsula is an Asian brand looking for representation in the United States,? he said. Hotel brands in general are trying to get into major U.S. urban markets, he added, which is a tough feat, since there is frequently little space for new-builds in downtown areas. Mandelbaum said the Chicago marketplace is also reaping the benefits of the strong economy and that redevelopment of the city?s downtown has also been spurring growth. Properties that are already under construction in the Windy City include a Grand Bay Hotel, a Hotel Sofitel and a Park Hyatt, all to open next year. A series of other properties, including an Embassy Suites, Fairfield Inn, Red Roof Inn and Hilton Garden Inn are also on the books, according to the Chicago Convention and Tourism Bureau. Chicago over the past year has added approximately 3,000 rooms to its inventory, said Paul Astleford, president of the Chicago Convention and Tourism Bureau. Chicago?s hotel occupancy has, over the past 20 years, gone through a series of cycles that fluctuate with the addition of new convention and trade show space, which creates demand for new hotel rooms. When rooms are added, it tends to make occupancy rates and ADRs dip. When convention facilities again expand, occupancy rates and ADRs go back up. Astleford credits a number of factors with helping Chicago to increase its hotel business. The city last year hosted Pow Wow, a trade show organized by the Travel Industry Association of America that brings together international tour operators and U.S. tourism suppliers. That show brought almost an immediate increase in Chicago?s leisure tourism business, said Astleford, for the simple reason that a great many international attendees had not been to Chicago for quite some time and were pleased with its offerings. The city?s tourism promotional efforts have also expanded over the past five years beyond large convention and trade show into the mid-size to small conventions and meetings market, as well as the leisure market. Tourism entities have also successfully pushed Chicago?s cultural offerings, he said. Other factors that helped hotel business include labor concessions that have benefited trade show attendees, as well as transportation advances, such as shuttle buses, which have made Chicago a more affordable place to host a convention or meeting. This year Chicago?s Mayor Daley launched a citywide program called ?Chicago: We?re Glad You?re Here!? to make conventioneers feel more welcome when they get
