July 09–Navy Pier plans to send out formal requests this summer seeking real estate firms to build, finance and operate a five-story boutique hotel on the east end of the pier.

Requests for proposals would follow shortly thereafter, but the hotel still needs to be approved by the Chicago Plan Commission. A 1973 ordinance bans private development east of Lake Shore Drive and it wasn’t immediately clear how Navy Pier would skirt that rule.

Executive Vice President of Navy Pier Inc., which operates and manages the pier, Steve Haemmerle, imagines the 150- to 225-room hotel would be adjacent to exhibition space Festival Hall. It would be built on top of an existing two-level dining and entertainment structure, but its final height would still be lower than the tallest surrounding structures, such as the Grand Ballroom, Haemmerle said.

“We’re certainly very optimistic and we think the hotel will be wonderful addition to Navy Pier,” Haemmerle said. “It’s our expectation that we’ll be able to find a development partner who will think likewise.”

It would be that hotel developer’s responsibility to drive year-round occupancy, he said. While Navy Pier draws about 9 million visitors annually, attendance falls significantly in winter months.

Chicago hotel analyst Ted Mandigo said if the hotel is approved, Navy Pier has a marketing challenge ahead.

“I think skeptical is a polite way to phrase it,” said of his feeling toward the hotel. “It has its challenges. They might find a tourism development firm who says ‘Yeah we want to get in that game…’ but I don’t know the name of that company yet.”

He said the challenges lie in the fact that Navy Pier is a seasonal venue and that the hotel would rely largely on tourism, which is increasing slowly — but hotel expansion and competition is increasing even more quickly, he said.

Hotel room supply will increase 27 percent in the next 3 to 4 years if all projects move forward as planned, he said.

A boutique four-star hotel would cost between $350,000 and $400,000 per room, he said. That puts the proposed hotel between $52.5 million and $90 million to develop.

Meanwhile, Navy Pier is in the middle of modernization that started last September and is set to be finished by the summer of 2016, a year later than originally planned.

Part of the group’s Centennial Vision, this first round of updates is financed with $115 million from a bond fund of the Metropolitan Pier and Exposition Authority, which owns the pier and McCormick Place. That fund is supported by hotel tax revenue.

Navy Pier has remained open during construction, which will mostly take place during the periods between Labor Day and Memorial Day.

Green space will be added to the South Dock and other upgrades will include turning the South Arcade indoor walkway into a space for Chicago-themed food vendors and a lighted water fountain in Gateway Park.

The design team is led by landscape architect James Corner, who is known for his work on Manhattan’s High Line Park. Construction is managed by Madison Evans Construction Group LLC.

Additional renovations at Navy Pier depend on funding becoming available, Haemmerle said. The goal is to increase visitors to Navy Pier from 9 million annually to 11.5 million.

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