Hotel development in West Michigan remains on a torrid pace for 2019.
Developers have plans to add more than 800 new rooms this year, with developments popping up in downtown Grand Rapids and in suburban areas surrounding the city. At the same time, although annual hotel occupancy dipped slightly for 2018, hotel revenue actually increased, a reflection of record room bookings.
Doug Small, president & CEO of Experience Grand Rapids, remains cautiously optimistic for the sector as developers work to add a large number of rooms in and around the city.
“While occupancy may decline again in 2019, we may be booking more rooms than we ever have before, and as such, revenue will increase, and revenue is what pays the bills,” he said.
Visitors booked 1.8 million room nights in Kent County last year, up by more than 12,000 from 2017. Current inventory stands at about 8,100 hotel rooms in Kent County, where hotels generated nearly $216 million from bookings last year, a new record.
Amid that strong hospitality environment, developers continue to target the West Michigan region for a handful of new hotel projects.
However, Peter Beukema, CEO of Hudsonville-based hotel management company Suburban Inns Inc., expects the rate of expansion to slow after the current boom of construction wraps up.
“What is really going to slow hotel growth is access to team members and talent, but also as interest rates increase, it makes construction a lot more challenging,” he said.
Small at Experience Grand Rapids, the convention and visitors bureau for Kent County, does have a “slight concern” that the hotel inventory continues to grow at a rapid pace, with the majority of projects including between 100-120 rooms.
“Those types of hotels, outside of the amateur sports market, don’t tend to bring new business opportunity with them,” he said. “They’re not large enough for (attracting) meetings business, so I have concerns that it will be a battle between all of our hotels to take others’ business as opposed to bringing in new business.”
Downtown convention hotel
As smaller hotels continue to be built, Small is focusing on a major gap in the downtown Grand Rapids market: another convention hotel.
To that end, officials are currently weighing plans for a possible expansion at the city’s DeVos Place Convention Center to include a new hotel and added inventory aimed at boosting the city’s convention and meeting business.
A 2016 study commissioned by Grand Action, the Grand Rapids-based group consisting of various business and philanthropic leaders, identified the need to begin the planning process for this expansion, which is still underway. Current plans for hotel could include 350-500 rooms, according to Small.
The idea is that additional hotel inventory would attract more events to DeVos Place. The recommendation from the study was that the city should issue a Request for Qualifications to develop the hotel attached or adjacent to DeVos Place.
The Grand Rapids-Kent County Convention/Arena Authority is leading the study around another convention hotel, with possibilities so far showing it being built on DeVos Place.
“What it gives us is an opportunity to book larger, citywide conventions or two convention groups at one time to maximize our hotel inventory,” Small said. “The study identified that’s what we need to get to the next level.”
The authority board will next consider possible ways of funding the construction of the hotel and work with an architect on design and layout. Small estimated the work will take place in summer or fall this year.
Since 2016, developers have added 902 rooms in Kent County alone, according to data from Experience Grand Rapids. In the next couple of years, more than 1,300 rooms will come on the market in the county.
These include the AC Hotel by Marriott, which will open in the heart of downtown with 130 rooms, and a 12-story Hyatt Place Grand Rapids, which will offer 160 rooms and occupy one of the twin towers Orion Construction is building in the downtown business district. As well, Embassy Suites by Hilton, a seven-story, 246-room hotel overlooking the Grand River on the north end of downtown, will open this summer. Staybridge Suites, a 110-room riverfront hotel north of downtown’s Sixth Street Bridge is slated to open by midyear.
Beyond 2019, future development includes hotels in Kentwood, Grandville, Walker and Wyoming, as well as the 13-story, 146-room Marriott Residence Inn extended-stay hotel project proposed by Portage-based real estate firm The Hinman Co. in downtown Grand Rapids.
All that new development could affect hotel room rates, which have increased since 2017. According to Experience Grand Rapids, the average hotel rate in 2018 was $119.62, up from $117.63 the prior year.
Beyond Grand Rapids
On the lakeshore, 200 additional rooms are expected to come online this year in Holland, according to Sally Laukitis, executive director of the Holland Area Convention & Visitors Bureau.
That comes on top of a new Home2Suites by Hilton, which opened earlier this year in Holland Township. Two more hotels — SpringHill Suites by Marriott and Staybridge Suites by Intercontinental Hotels Group — will open later this year. These hotels put the assessment district — which spans Holland, Holland Township, Park Township and Hudsonville Township — at just fewer than 2,000 rooms.
The lakeshore region has an occupancy rate of 66.6 percent, and stays busy in the winter with corporate business and in the summer with tourism.
Laukitis said the bureau is taking a “wait and see” approach in determining how the additional rooms will affect occupancy rates and revenue.
In addition to the three hotels, four other franchise licenses sold in the Holland market, signaling more development could be in the works, Suburban Inns’ Beukema said,
“To me, that’s a little aggressive in one market,” he said. “There’s really no new demand growth in that market.”