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Great Britain Based Hilton International Committed to Bringing the
 Grande Dame of Chicago Hotels, The Drake,
 into a Second Golden Era
By Kathy Bergen, Chicago Tribune
Knight Ridder/Tribune Business News

Feb. 28, 2005 - With a massive makeover already under its belt, The Drake Hotel, the grande dame of Chicago hospitality, is preparing to go under the knife once again, aiming to reclaim its place among the city's most prestigious inns.

During the next two years the 84-year-old Italian Renaissance-style landmark will spend nearly $15 million to add a 4,000-square-foot fitness center, a 7,500-square-foot executive conference center, and new luxury bedding and oversized desks in all 537 rooms and suites, and to more aggressively advertise its history-steeped charms.

The initiative, led by recently arrived general manager Gregor Andréewitch, comes atop a five-year, $45 million renovation of guest rooms and hallways completed in 2003, which pulled the 14-story dowager out of a down-at-the-heel lapse in the early 1990s.

With the additional planned improvements, "I think the Drake will be knocking on the door of the Four Seasons, the Ritz-Carlton, the Park Hyatt and the Peninsula," said hotel consultant Ted Mandigo, referring to the ruling quadrumvirate of ultraluxury hotels in Chicago.

"After a couple of difficult years for the industry, with 9/11 and the war in Iraq, it's time to reposition the hotel, to bring it back to people's minds as it used to be," said Andréewitch, formerly general manager at the extremely busy Hilton London Heathrow Airport.

Ah, how it used to be. From its birth in 1920 until its sheen was eclipsed by the debut of the Ritz-Carlton Chicago in 1974, the Drake was the Chicago oasis for visiting kings, queens, diplomats and entertainers.

The list of visiting dignitaries and celebrities, from 1920 to the present, is copious, and runs the gamut from Winston Churchill to Princess Diana, and from Salvador Dali to Martha Stewart. The wooden bar in the snug Cape Cod Room, one of the hotel's five restaurants and clubs, sports the carved initials of Joe DiMaggio and Marilyn Monroe.

Climbing its way back to the very top echelon in Chicago would be a tremendous challenge, some observers say, given the physical constraints that come along with an older building, where guest rooms come in varying sizes and bathrooms tend to be smaller than the luxury norm these days.

"They are never going to compete with the new luxury hotels that exist in Chicago," said Brian Flanagan, president of Property Valuation Advisors Inc., a Chicago-based real estate consultant. "It's a function of age--unless you spent massively, hundreds of millions of dollars in renovations, which would not be economically prudent."

But others say the challenges can be addressed through savvy marketing and elegant treatment of existing facilities.

"They certainly have the capacity, with well-appointed and luxurious hotel rooms and service," said Mandigo, president of T.R. Mandigo in Elmhurst. "And they have a long-term reputation they can rebuild."

Observers agree the Drake should emerge from this latest round of upgrades as a more formidable upper-end competitor, not only for the social functions and leisure business that have long been its bread and butter, but also for business travelers and corporate meetings.

"Whenever you try to freshen up a product and add more service and more exposure, you're probably going to penetrate the market better," said Flanagan. "And rates in the Chicago marketplace are starting to inch up, so this is probably a very good time to try to improve your product."

As well, the opening of Drake Bros.' Steaks Chicago, which replaced the Oak Terrace Room restaurant last summer, should help draw business travelers, he said.

Hilton International, owner and operator of the Drake, came close to selling the property for an estimated $80 million in the fall of 2003, but the deal fell through. A partnership controlled by the Brashears family, longtime real estate investors, owns the land beneath the hotel, and ground lease rates are renegotiated every five years. This setup complicated the effort to sell the property.

The property is no longer on the market and Great Britain-based Hilton International, which owns the Hilton name outside the U.S. and has only one other property within the States, is committed to bringing the Drake into a second golden era, said Andréewitch, a Hilton International veteran.

The Drake will be starting the process from a position of considerable strength, including a client base that is drawn to its historic flavor.

"Yes, there are newer luxury hotels along the Mag Mile that are all stunning in their own ways, but I love the sense of 'days-gone-by' grandeur and romance that I experience every time I walk in the lobby of the Drake," said customer Lorraine Williams.

For her wedding reception in 2002, Williams opted for a champagne tea in the hotel's elegant six-room Presidential Suite, which over the years has hosted the prime ministers of Australia and Tunisia, the queen of Thailand, an Italian president, Nancy Reagan, Princess Diana and Queen Beatrix of the Netherlands.

"I have to admit we all got a kick out of the fact that British royalty had stayed there," said Williams, who married a Briton and now lives in London.

The Drake, with about $55 million in annual revenue and 550 employees, is performing well relative to a peer group of 40-plus high-end hotels downtown.

In 2004 its occupancy rate was nearly 73 percent, on par with the group average of 72.2 percent, according to Smith Travel Research. Its average daily room rate was $193, compared with $165 for the group, and its revenue per available room, a measure of profitability, was $141 per day, compared with $119 for the peer group.

Still, it has a way to go to match the performance of the elite foursome, where average daily rates are in the $300 range and revenue per available room ranges between $210 and $220, noted Mandigo, who has done consulting work for the Drake in the past.

Toward that end, the hotel is launching a $500,000 print advertising campaign even as it begins the next round of facility improvements.

Using the theme "Classic Style, Contemporary Pace," the campaign hopes to convey that the facility "has all the amenities a business traveler expects," said Robert Allegrini, a hotel spokesman. Ads will be placed in publications aimed at meeting planners and business travelers, as well as in newspapers in out-of-town markets.

By midyear the hotel plans to replace its small-scale fitness center with a $5 million facility that will include treatment rooms for massage, wraps and other specialty services.

By the end of 2006 the hotel will invest $6 million to $8 million in a 10th floor executive conference center, with 10 to 12 boardrooms, a business center and an executive lounge--a larger, more consolidated offering with views of Oak Street beach and the lakefront beyond.

As well, it is redesigning exterior and interior lighting, and continuing refurbishment of the interior. Beds will have plush-top mattresses, 350-thread-count sheets and duvets, while each room will have expansive table-style dark wood desks.

And the public spaces will continue to be tweaked. For instance, smoked glass will be removed from columns in the stately Palm Court, where tea is served, in order to showcase the original marble.

"Do we expect to go toe to toe with the other hotels down the street?" Allegrini said. "Absolutely."

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