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Five Years After the Last Hotel Was Built in Downtown Milwaukee, Developers
Now Have Up to Six New Hotels in the Planning Stages

By Tom Daykin, Milwaukee Journal SentinelMcClatchy-Tribune Business News

July 17, 2006 - At last count, there were six proposals for new hotels in and around downtown Milwaukee, along with a couple of others lurking.

If all those hotels were built, they would add more than 800 rooms to the downtown area -- an increase of more than 25% to the downtown room supply.

What in the name of Howard Johnson is going on here? The local hotel business has been improving. But Milwaukee isn't Las Vegas or Orlando. Is it?

"The downtown (hotel) occupancy rate is now approaching 70 percent," said Greg Hanis, who operates Hospitality Marketers Inc., a hotel industry consulting firm. "And that has stimulated a lot of investment interest."

But, said Hanis and others, that doesn't mean all of the hotels proposed will be built. Despite the improvements, particularly in business travel, Milwaukee remains a highly seasonal hotel market, where the good times, generated by such events as Brewers games and Summerfest, gradually give way to the doldrums of winter and early spring.

"People tend to jump on the bandwagon," said John Rutledge, chief executive officer of Chicago-based Oxford Capital Group LLC, which owns the downtown Hampton Inn & Suites. "I think the majority of (the proposed hotels) won't happen."

Two of the proposals emerged just last week.

Ruvin Development Inc. of Mequon disclosed plans for a 175-room hotel, as part of a mixed-use project proposed for the block bordered by N. Old World 3rd St., N. 4th St., W. Juneau Ave. and W. McKinley Ave. That 20-story project would include condominiums, offices and retail space.

Also, Development Opportunity Corp., of Fort Myers, Fla., announced plans for a 120-room Staybridge Suites extended-stay hotel. The Staybridge would be part of a 12-story mixed-use project, including condos and retail space, at the southeast corner of N. Water St. and E. Juneau Ave.

Other proposed hotels include local developer Doug Weas' plans for a 150-room Renaissance ClubSport by Marriott, part of an 18-story mixed-use project, at the southeast corner of N. Broadway and E. St. Paul Ave., in the Historic Third Ward.

Also, Chicago developer Richard Curto wants to build a 125-room boutique hotel and a 140-room hotel catering to business travelers as part of his mixed-use development east of N. Water St. and north of E. Ogden Ave., in the Park East area.

Finally, Ghazi Co., of Charlotte, N.C., is considering a mixed-use development at the southwest corner of W. Wisconsin Ave. and N. 4th St. that would include a hotel with upward of 150 rooms.

That adds up to 860 rooms, and doesn't include other proposals said to be in the works. The lurkers include a hotel that would be part of a possible office tower on downtown's east side, and a hotel in the Walker's Point area, just south of downtown, that would cater to people attracted to the Harley-Davidson Inc. museum that's under construction.

It's worth noting that most of the proposals are still in the preliminary development stages. And except for the Staybridge Suites and the Renaissance ClubSport, most of the plans have not been publicly connected with a specific hotel brand.

Having a brand doesn't guarantee that a hotel will get built. Most hotels are typically financed by investors who pool together their equity and then borrow the remaining funds from a bank or other commercial lender. Having a brand name is usually needed to obtain financing. But it doesn't guarantee that the loan will be forthcoming.

Still, it is striking that five years after the last hotel was built in downtown Milwaukee, so many proposals have surfaced.

Much of that is tied to the overall improvement to the nation's hotel industry, especially in the area of business travel. The hotel industry was hurt badly by the 2001 recession, and the dampening effects on travel from the terrorist attacks of that same year.

Now, the travel business is returning to levels prior to 2001, said William Otto, president of Marcus Hotels and Resorts, which operates three downtown Milwaukee hotels.

In 2005, Milwaukee's hotels had a citywide occupancy rate of 61.2%, compared with 54.2% in 2001, according to Smith Travel Research Inc., of Hendersonville, Tenn. Hanis said the current occupancy rate just of downtown Milwaukee's hotels is closer to 70%.

Meanwhile, downtown continues to attract new housing, shops, restaurants and taverns, as the definition of downtown expands to include nearby neighborhoods such as Walker's Point and the Park East area, Hanis said.

"There's just a lot of real estate down there," said Hanis, who is serving on a consultant for some of the projects. "And people are saying, 'Hey, this isn't covered by hotels.' "

The new round of prospective hotel developers all believe the market justifies new projects, including upscale boutique hotels, such as the Renaissance ClubSport, and extended stay hotels, such as Staybridge Suites.

"I know there's pent-up demand in Milwaukee," said Phil Hugh, president of Development Opportunity, of the Staybridge project.

Hugh, however, said there typically are a certain number of hotel projects that never make it off the drawing board. The odds favor projects that beat their competitors to construction starts, he said. That's because a lender who knows that an additional hotel is being built might look less favorably upon financing a competing hotel.

"So, right now, we have a horse race," Hanis said.

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Copyright (c) 2006, Milwaukee Journal Sentinel

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