A string of announced hotel projects that could add more than 1,100 rooms in the Quad-Cities is strengthening the local hospitality industry rather than saturating the market, analysts and developers say.
The trend of hotel construction — and in some cases renovation — shows the hotel industry nationwide is pulling out of the recession's doldrums. In the Quad-Cities, 10 projects have been announced since January 2013, and an 11th project still under construction began before then.
"After the recession, lending became extremely difficult to get for hotel projects," said Jeff Higley, vice president for digital media and communications for STR, a company that tracks hotel data. "We went three years where hotel construction was almost non-existent.
"The construction pipeline for the hotel industry is picking up steam across the country. It is probably a sign of the health of the industry that companies are looking at building hotels."
That is how Damen Trebilcock, senior vice president for Heart of America, sees it. His company's Holiday Inn and Suites on Elmore Avenue is expected to open in August. That hotel chain once had a significant presence in the Quad-City market, saw it dwindle and now is on the increase. In Davenport and Moline, separate developers are building versions of the company's Holiday Inn Express brand.
"Whenever you do a franchise, they do a market study for you," Trebilcock said. "I think what it does say is the market has turned around — it is on fire. There is a resurgence occurring, and that is great."
To determine the feasibility of hotel projects, analysts and the lenders that hire them look at statistics such as occupancy rates, average daily room rate and average revenue per room. They compare proposed properties to similar operating ones.
"Those are things that are very important to hotel owners hearts," said Mark Eble, Midwest vice president of PKF Consulting. "We have a fairly big and complicated model that we use to estimate these things."
The Quad-Cities' occupancy rate was 49.7 percent in 2009 and climbed to 56.1 percent in 2013, according to STR. In the Quad-Cities, from 2009 to 2013, the average daily room rate rose 12 percent to $80.54 but the revenue per room increased by 26 percent to $45.21.
Restoration St. Louis CEO Amrit Gill thinks his company's Hotel Blackhawk, which opened in 2010, is partly responsible for seeing some of the financial numbers increase in the Quad-City market. He said Hotel Blackhawk staff have expressed concern about the number of new hotel projects, but studies show downtown Davenport is under-served. Restoration St. Louis will start work on the 60-room City Square hotel project this year.
"We’ve made the pie bigger," Gill said. "It won’t be the Hotel Blackhawk that will be hurt by the excess in inventory. It will be the two- and three-star hotels."
Along with new construction, renovations such as what is planned for The Lodge in Bettendorf, along with the former hotel at Interstate 74 and Middle Road that was demolished and is being rebuilt as a Hilton Garden Inn, are good signs, too.
"One of the sayings in the industry is that it isn’t over-built, it is under-demolished," Higley, of STR, said. "Anytime you get an older building down and put up something more modern is good for the market."
Hotel franchises allowed operators to avoid upgrades as they struggled through the recession, but that is changing as the economy improves, Higley said.
Both of the Bettendorf projects will have fewer rooms when the renovations are done, but that is OK, said Joe Taylor, president and CEO of the Quad-Cities Convention and Visitors Bureau, who points out that travelers have an expectation for bigger rooms in new hotels.
"I think remodeling and new construction can be designed to meet the expectations of travelers," he said.
It is all good news for the man who oversees the tourism trade in the Quad-Cities as people come out of the recession ready to travel again.
"We are probably seeing pent-up demand that is catching up," Taylor said. "We may not have been traveling as much, but now we are ready to start traveling and doing more of it."