As the new Radisson in north Normal opens its doors this month to guests, the hotel will face increasing competition in a Twin City market that may already have more rooms than it needs.
The occupancy rate for Bloomington-Normal hotels in June was 53.2 percent, lower than other similar metro areas around Illinois and far lower than the statewide average (77.9 percent), according to data from STR, a data and analytics firm, and the Bloomington Normal Hotel and Lodging Association.
That data, as well as observations from local hotel and government officials, point to a hotel market strained by flat demand and increased competition. In addition to the Radisson, the Hyatt Place in Uptown Normal opened in 2015, and the Residence Inn by Marriott opened near State Farm’s Corporate South campus in 2014.
“It’s pretty flat over the past couple years,” said Ray Ceresa, president of the Bloomington Normal Hotel and Lodging Association and general manager of the Doubletree by Hilton Hotel in Bloomington. “We’ve got the new properties, and they’re beautiful and complement our area. However, there are a lot of hotel rooms, and we’re all fighting for the same pieces of business.
"It's kind of a little bit scary, the uncertainty that we have in our market."
“It’s kind of a little bit scary,” he added, “the uncertainty that we have in our market, of how are we going to fill these rooms every day?”
The weak local hotel market was cited last week as the Town of Normal weighed whether to give the Hyatt Place a tax break—at $88,000 per year—to help it with a refinancing plan. The Hyatt’s owners eventually withdrew that request, citing increased revenue strain on Normal’s budget caused by the state budget package.
“The hotel market is soft in this community right now,” Normal Mayor Chris Koos said on GLT’s Sound Ideas. “That’s not to say they’re in danger of going out of business (at) what you’d consider the leading hotels in the community. But business is soft for them.”
The increased competition is already having an effect. Hotels that are not performing as well as more likely to lower their rates or make deals for customers, driving rates down for other properties, said Ceresa. That hurts financial performance across the board.
“It’s a trickle-down effect,” he said.
So why isn’t there more demand for hotel rooms locally?
There are many factors, but Bloomington-Normal’s largest employer—State Farm—is a major player. A few years ago, State Farm had several projects underway that drove up occupancy rates to near-record levels, said Ceresa. Now with the Bloomington-based insurer operating hubs in other states, he said, local demands for rooms is lower.
Likewise, the state budget stalemate slowed down the booking of trainings and other conference activity in Bloomington-Normal, Ceresa said.
On the positive side, the big drivers that continue to drive up occupancy are the Illinois High School Association tournaments at Grossinger Motors Arena and Redbird Arena. Local hotels employ sales teams to try and recruit more business into the area, as does the Bloomington-Normal Area Convention and Visitors Bureau.
“There are too many hotels for what kind of business is coming into our market. You can’t overbuild hotels and just expect to open the door and people will come,” Ceresa said.
The soft hotel may complicate efforts to bring a hotel to downtown Bloomington. There were concerns when the Marriott Hotel and Conference Center opened in Uptown Normal that it would cannibalized existing hotel business, Koos said, though it argued that its conference services would create new demand.
“The Bloomington hotel, to be successfully, will have to have some kind of identity in that realm,” said Koos.
Bloomington Mayor Tari Renner said Tuesday during GLT’s Sound Ideas that the hotel slowdown won’t stop the city from pursuing the downtown hotel.
But it may mean that it’s a smaller, boutique hotel. The city’s downtown revitalization efforts can only advance so far without a hotel, Renner said.
“(The slowdown) is certainly an important variable, but will it stop us from looking for one? No. And the reason is because downtown hotels in metro cities—especially if they’re the first one—tend to create their own markets. And especially if they’re right next to an arena like ours.”
Here is a closer look at occupancy rate data provided by STR:
Hotel Occupancy Rate
Infogram
Listen to GLT's full interview with Ceresa below:
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