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Hotel boom could lead to doom for downtown Milwaukee market

Jason Czoschke, a carpenter with C.D. Smith Construction Inc., Fond du Lac, drills holes Thursday for a door backing in an area that will become a restaurant at the downtown Milwaukee Marriott. The 205-room, $54 million Marriott will be the third new hotel in downtown Milwaukee in less than a year. (Staff photo by Kevin Harnack)

By Joe Yovino

Downtown Milwaukee’s hotel market can sustain more new rooms, says the man behind what will be the third hotel to open there in less than a year.

The numbers don’t look great, however.

Three hotels are under construction around downtown Milwaukee and two more have been proposed. With the addition of those five properties, Milwaukee would add another 1,015 rooms, bringing the total to 4,955.

That seems like a lot of places to rest your head. But that’s OK, according to Doug Nysse, principal at Arrival Partners, who developed the soon-to-open downtown Milwaukee Marriott.

“The marketplace now is coming in eyes wide open about the supply that’s coming into town,” said Nysse, who gave The Daily Reporter a tour Thursday of the Marriott under construction at Wisconsin Avenue and Milwaukee Street on the city’s east side. “People think they can position their properties to be successful in this marketplace.”

“Yes, there’ll be more rooms, but there’ll be more interest in the properties,” Nysse added. “I think the Pfister, Kimpton, the Hampton Inn, the Hilton Garden Inn … I look forward to seeing how they’re going to compete.”

That competition will be as fierce as valets fighting for tips.

The Hilton Garden Inn added 127 rooms to the downtown Milwaukee market in November. The Brewhouse Inn and Suites will add 90 rooms when it opens April 25 on the former site of the Pabst Brewery. The Milwaukee Marriott will contribute 205 rooms to the mix in early July, and the Potawatomi Bingo Casino Hotel will bring 382 more rooms to the party in 2014.

But wait, there’s possibly more.

In 2015, The Couture, a 44-story building planned for Milwaukee’s east side, would add 180 rooms, and Kimpton Hotels & Restaurants recently announced its plan to contribute 158 rooms to Milwaukee’s Historic Third Ward.

If the two proposed hotels become reality, they will increase hotel room supply by 25.7 percent in 2015.

“That’s a huge increase,” said Greg Hanis, a hotel industry analyst and president of New Berlin-based Hospitality Marketers International Inc. “We’re getting to the point where we were before the recession. We’re probably one or two properties over where we should be.”

During the recession, downtown Milwaukee’s occupancy rate, which determines whether hotels are making money, was at 55.6 percent. Hanis said a 65 percent occupancy rate means hotels are barely breaking even.

In 2012, the Milwaukee market had a 65.5 percent occupancy rate, according to Smith Travel Research. That’s up from 64.6 percent in 2011. If the Kimpton and The Couture are built, the occupancy number in 2015 will fall to less than 60 percent, according to Hanis.

“You are getting to a point where you’re going to have more supply than demand,” Hanis said. “The problem is the market can’t absorb that many added hotels rooms.”

Joe Yovino is the Web editor at The Daily Reporter. He can be reached at joe.yovino@dailyreporter.com.

One comment

  1. If adding more hotel rooms without enlarging the convention may be specious at best. Do both and even add a few more larger hotels. that’s what attracks big convention. Don’t get stuck on stupid !

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