GRAND RAPIDS –– New data on hotel rates across the Midwest offered some sobering analysis on the cost of a room in downtown Grand Rapids.
A report this month from ChicagoHotels.org found centrallylocated hotels in Grand Rapids that ranked at least three stars had an average rate of $174, the fifth most-expensive rates behind Cincinnati, Ohio; Madison, Wis.; Ann Arbor, Mich.; and Fort Wayne, Ind.
The findings came as somewhat of a surprise to Doug Small, president and CEO of Experience Grand Rapids, which handles convention and tourism marketing for Kent County. The reason: The report’s data didn’t match with Experience Grand Rapids’ research, which pegged the average rate at $117.63 for a room in Kent County.
Nonetheless, Small says it’s good news that hotel rates have picked up in recent years considering the relatively low prices that downtown hotels commanded in the past.
“I’ve made it clear to our hotels: I’m never going to feel like I have to defend a high rate,” Small said, noting that the organization hears few complaints from convention users over the cost of rooms. “A primary reason you lose business is because of rate. We’re not losing any more business today than two years ago due to rate.”
But Small and other sources were quick to point out that additional downtown hotel inventory expected to come online in stages over the coming years could start to push those rates down.
Small wasn’t sure what conventions might have been visiting the area at the time that ChicagoHotels.org pulled its data. However, he noted the lack of recent pushback from convention visitors over hotel rates serves as positive news for the region’s hotel and tourism economy.
At the end of last year, Smith Travel Research, which tracks hotel data, found that Grand Rapids had for the first time outpaced larger, competitive cities like Pittsburgh, Milwaukee, Kansas City and Cincinnati in the key metrics of occupancy, average daily rate and revenue per available room.
“If you look back just a few years ago, we were really undervalued, quite honestly, as a destination,” Small said, adding that leisure travelers might not be as happy with the upward cost trends. “We’re finally getting to the point where we’ve caught up and in some cases passed our competitors in rate.”
MORE SUPPLY AHEAD
The uptick in hotel business for the Grand Rapids area comes at a time when several hundred more rooms are planned for the downtown area, as well as in outlying suburbs.
In the North Monroe neighborhood just north of downtown Grand Rapids, Holland-based hotel developer Suburban Inns Inc. has a 246-room Embassy Suites under construction and set to open next year.
Two other Grand Rapids developers — CWD Real Estate Investment Inc. and Orion Construction Company Inc. — also have hotels under construction as part of larger mixed-use developments in the central business district.
The Studio Park mixeduse development in downtown’s Arena South district also includes a planned Canopy By Hilton hotel.
Next month, the Grand Rapids-Kent County Convention and Arena Authority (CAA) is expected to release a feasibility study for expanding the DeVos Place Convention Center in downtown Grand Rapids that could also involve building an on-site hotel.
Small of Experience Grand Rapids said he expects the feasibility study to suggest moving forward with a hotel connected to the convention center.
Given the current level of hotel activity, sources said they fully expect to see some moderation in rates as new supply comes online. But to what extent pricing eases remains a matter of debate.
“We’re adding 800 rooms to the (downtown) market,” said John Wheeler, a principal with Orion Construction, the development and construction firm building a Hyatt Place hotel as part of a 15-story, twin-tower development along Ottawa Avenue between Pearl Street and Lyon Street.
“With new supply, we’ll draw some new tourists to the area and they want a new experience,” Wheeler said. “The market does the best it can, and right now, the supply is coming on strong. But you might see a moderation in rates.”
The amount of incoming hotel inventory remains a matter of concern, according to Small.
“My biggest concern is where that tipping point is — how much demand we can drive,” he said. “When you get to the point where you start to see supply overtake that demand, then your rates drop because it becomes competitive. We’ve worked so hard as a destination and a hotel community to get rates up to where they should be and on par with our competitors. I’d hate to see them drop too much because it’s tough to build them back up again. That’s my concern.”