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updated: 10/8/2012 7:55 AM

Election slows business in hospitality industry

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  • The Westin Chicago Northwest Hotel in Itasca has been getting more corporate bookings during the week and sports, religious and fraternal organizations on the weekends.

      The Westin Chicago Northwest Hotel in Itasca has been getting more corporate bookings during the week and sports, religious and fraternal organizations on the weekends.
    Courtesy of Westin Chicago Northwest Hotel

  • Max Schroeder

      Max Schroeder

 
 

The presidential elections are having an impact on the suburban hospitality industry, even months in advance of that historic day. Reservations have slowed for travel and bookings, and events are being made closer to their dates.

But it's like that every four years, experts said, and this political season is no different as business leaders mull upcoming political changes and economic uncertainty.

"People are waiting to see if there's a change in the country," said Shirlanne Lemm, president of GOA Regional Business Association, which includes the former GOA Regional Business Association, Elk Grove and Itasca chambers. "Somehow they feel more comfortable knowing what's going to happen."

Lynne Chittim, travel agent and owner of Travel Leaders in West Dundee and Crystal Lake, agreed that the election has briefly slowed down decisions by both consumers and business leaders.

"It's always like that in an election year," Chittim said. "People are more cautious about spending money."

Business owners in any industry, need some degree of certainty to make those investments in conventions, annual meetings or other events, said Sean Lynch, president of MPI Chicago, a meeting planners association.

"Meetings used to be booked six months or more in advance, but now they're coming in one to three months in advance because of that uncertainty," said Lynch.

Still, meetings are being planned and business leaders are finding that in-person meetings provide a better return on investment than using technology, including video conferencing or webcasts, Lynch said.

"Face to face meetings offer 12 times greater ROI, despite the cost of the trip. It provides huge benefits later on," Lynch said.

The NATO meeting in Chicago was a prime example of in-person meetings that took place this year, despite a stagnant economy. And while Chicago was the focal point of that massive meeting, the suburbs benefited tremendously. Thousands of NATO participants and their guests stayed at hotels or ate at restaurants in the suburbs, experts said.

But don't think of the suburbs just for overflow whenever Chicago gets overcrowded with tourists or conventioneers.

Suburban venues are strengthening their own hospitality industry, separate from Chicago. And some of that strength is coming from major events, such as the Ryder Cup.

Also consistent hot spots, including the Donald E. Stephens Convention Center, the Rivers Casino, Arlington Park, continue to attract visitors who arrive from nearby O'Hare International Airport.

"The suburbs are essentially surviving on their own markets, with the larger properties competing for price sensitive conventions and suburban meetings. They've been forced to become more independent than they ever have been in the past," said Ric Mandigo, senior consultant with Elmhurst-based TR Mandigo & Co., a research firm.

The suburbs have historically been their own market when there were strong local businesses, specifically corporate headquarters, but also with groups and leisure travelers. During the early 1990s, the suburbs could count on 60 to 90 days of overflow from downtown Chicago, driving occupancy up above 70 percent.

With more hotel rooms in Chicago now, along with a change in convention patterns, these overflow days are now around 30 to 60 days, said Mandigo.

Forced to stand on their own merits, suburban hotels, restaurants, meeting venues and others related to the hospitality industry are finding an uptick in business this year, experts said.

The last year or two have been looking up, compared to the 2006-07 heydays for the suburban hospitality industry, experts said. Mandigo even said business is "way up" and he claims to be more pessimistic than most consultants in the area.

"The 2006-07 period was simply spectacular years in the city, and while the 9/11 recession certainly took a toll on the industry, the fundamentals underlying the economy remained essentially the same," Mandigo said.

Depending on who you talk to, this recession could be seen as a crisis of uncertainty as well.

But the last recession hit hotels because of the reluctance to travel and fears about safety, while this time around it's because the financial and real estate markets underwent a major downturn, Mandigo said.

"Both segments effect the hotel industry very profoundly, but the former represents a more temporary setback, while the latter makes hotels less of a good investment overall. It's more fundamental from a business and lending standpoint," Mandigo said.

In order to return to the 2006-07 period, we'd need to see a substantial increase in business activity and leisure travel. Moreover, during the 2006-07 boom, we added a ton of new inventory, or more hotels and other resources, which hurt overall occupancies and rates, which has slowed recovery, he said.

"We'd need some less competitive hotels to drop out of the market to partially offset the glut of new rooms, combined with increased travel," Mandigo said. "The hotels themselves could increase rates if they wanted to, but consumers (and companies) have been trained to look for value, which means until we increase consumer sentiment, it will be difficult to raise rates."

The Westin Chicago Northwest Hotel in Itasca has seen an increase in bookings on weekdays from business travelers and weekend bookings from sports, fraternal and religious organizations, said Diane Howard, the hotel's director of sales and marketing.

"It's always good to see corporate travel go up," Howard said. "It a good sign for the economy."

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