Economic Development, Real Estate, and Travel & Tourism

Hotel use rate grows

Grand Rapids may have to add additional event and meeting space to compete with larger cities.

November 11, 2016
| By Pat Evans |
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Following six straight years of growth, Kent County might be nearing its ceiling in terms of hotel occupancy with the current room supply and attractions.

Kent County has grown from 48.6 percent occupancy rate in 2009 to 68.4 percent year-to-date in 2016, but Experience Grand Rapids President and CEO Doug Small said he believes the rates will stabilize. The stabilization is in part to the addition of 800 new rooms in the county in the past 18 months but also the demand based on the reasons to visit the area.

Nationally, average hotel occupancy is approximately 66 percent and likewise is predicted to stabilize, Small said. Revenues, however, are expected to rise 3.7 percent the next year, so Small expects Kent County hotel revenue to grow for a seventh consecutive year in 2017.

In 2009, Kent County hotel revenue was approximately $100 million. This year, the county should end up with approximately $207 million, Small said.

“I’m still a little bullish,” Small said. “From occupancy, I think we’ve seen it. From revenue, we have at least one more year of growth.”

With the ceiling approaching, Small said the community is nearing a decision.

“Are we happy being just above the national average? Are we a 67 percent town?” Small said. “Or do we shoot for that 70 percent town. To hit that goal, we need new demand generators. That’s new attractions and more meeting space.”

Grand Rapids competes with larger cities for conventions and events — such as Cincinnati and Milwaukee — because of its value, quality and convenience. Those larger cities have more event space and hotel rooms, so they can also attract another level of customers.   

Small said he’s concerned if Grand Rapids doesn’t add additional event and meeting space, the already larger markets will fly by Grand Rapids.

“If we can’t accommodate, they’ll go to Milwaukee,” Small said.

Occupancy
2009 – 48.6 percent

2010 – 53.9 percent

2011 – 57.5 percent

2012 – 60.6 percent

2013 – 63.4 percent

2014 – 64.6 percent

2015 – 67.5 percent

2016 YTD – 68.4 percent

Average Daily Rate
2009 – $84.73

2010 - $84.79

2011 – $88.09

2012 – $92.94

2013 – $97.48

2014 – $100.97

2015 – $109.12

2016 YTD – $113.91

Hotel Revenue Growth
2009 – -7.3 percent

2010 – 11 percent

2011 – 10.9 percent

2012 – 11.1 percent

2013 – 9.7 percent

2014 – 10.1 percent

2015 – 13.4 percent

2016 YTD – 9.9 percent

Source: Experience Grand Rapids

 Small also heard outside discussions regarding the activation of the Grand River and how it should be a priority to help add to the city’s appeal to tourists and convention groups.

 “Any city that has activated its river has done well,” Small said, referencing similar projects performed in communities across the country.

The 800 new hotel rooms from the past 18 months are nice, but Small said they do little more than keep hotel room nights from leaking out to other counties. The recent addition of 800 hotel rooms was approximately a 10 percent addition to the county, which now is nearing 8,000 hotel rooms.

Instead of more small suburban hotels, Small would like to see two 400-room hotels with event and meeting space in downtown Grand Rapids.

“Small hotels don’t really attract new business, but it is a safe investment for an owner,” Small said. “A new 400-500 room hotel with meeting space gives us an opportunity to attract new, larger business to the downtown area, which makes everyone else better because it displaces normal everyday business to the suburbs.

“That’s the way to grow occupancy.”

To grow occupancy 1 percentage point, Kent County must book an additional 26,000 room nights a year, Small said. To move up to 69.4 percent, Small said Experience Grand Rapids and the West Michigan Sports Commission group sales efforts could meet the number.

To grow to the 70 percent point without new space or attractions, however, the approximately 78,000 room nights to reach the occupancy rate is a reach.

“I’m a blue sky guy, that’s a big number,” Small said of the 78,000 room nights. “We would need some kind of generator.”

Small said Grand Rapids might need more event space to help continue to grow the number of room nights, but it also would come with a return on investment with a new “bucket” of conventions the city can sell to for annual events, which could also ultimately lead to more downtown hotel rooms to support those.

“If we add 60,000 extra square feet, there are potentially another 200 more groups we can go after,” he said.

Talk of more event space could come at larger hotel projects or even new convention center space, but the latter would be difficult. There are only two sites the convention center could expand, either across Michigan Street at the site of the United States Post Office or across Monroe Avenue where the city and county buildings currently stand.

“If we decide we need more space, it will take a lot of time and money,” Small said. “The county and city won’t move for the sake of moving. But they did it with the police station.”

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