Notion of water parks saving hotels evaporates

A few short years ago, water parks were seen as the growth agent for the suburban hotel/entertainment scene, with parks planned in a half-dozen communities.

But with the downturn in the economy and the evaporation of easy credit, a $25 million park attached to a hotel in Arlington Heights is closing and a $135 million water park and resort in Gurnee has filed for bankruptcy reorganization, though it will continue to operate.

In both cases, a tough economy, fewer bookings and high unemployment were to blame, operators and experts say.

The Sheraton Chicago Northwest hotel and its CoCo Key Water Resort, which have 230 employees, are closing by Dec. 28, said Wendi Howard, a spokeswoman for the hotel and water park.

"The decision to close the property was not made easily and follows many months of operational adjustments, significant negotiations and work with union leadership, negotiations relative to adjustments in real estate taxes, and ongoing funding to maintain operations in hopes of some market recovery," Howard said. "Given the state of the economy in the Chicagoland market and the continued falloff in local business travel and corporate markets, it is not economically viable to continue with hotel operations."

Howard said no sale was pending on the Arlington Heights property, despite a report to the contrary based on an application for a liquor license change.

Despite the problems in Arlington Heights, CoCo Key Water Resorts operates nine other resorts and is adding one in Orlando, Fla., this spring, Howard said.

Howard could not answer whether people and groups that have booked events for next year will be reimbursed, how much debt was involved or if the property will be sold. Other hotel officials did not return calls or e-mails.

The Arlington hotel has undergone several changes since it opened in 1969 as the Arlington Park Towers. Hilton Hotels took over in 1974, and in 1985, new owners renamed it the Woodfield Hilton. In 1993, a recession eroded the hotel's ability to meet mortgage payments and it was sold by the Cook County sheriff at a foreclosure auction, with the mortgage holder buying it. Starwood Hotels & Resorts Worldwide Inc., parent of Sheraton, took over operation of the hotel in 1996.

While the hotel operates under the Sheraton brand name, it currently is owned by WPH Arlington LLC, Howard said.

Revenue is down about 40 percent in general for hotels, with the recession's domino effect of unemployment and tighter consumer spending taking its toll, said Marc J. Gordon, CEO of the Chicago-based Illinois Hotel & Lodging Association, which represents about 500 hotels statewide.

"All the hotels were trying to attract more families (with amenities like water parks), but they obviously didn't foresee this recession," Gordon said.

Arlington Heights received an estimated $400,000 a year in hotel, food, beverage and sales taxes from the hotel, said Thomas Kuehne, director of finance.

In addition to the employees who will lose their jobs, the closing will hurt vendors and businesses in the area that counted on revenue from hotel guests, said Laurie Stone, president of the Schaumburg Business Association.

"Although signs point to an economic recovery, it will be a long time until we know the full effect of the recession on our region," Stone said. "Hospitality, in particular, is an industry that has been hard hit by spending and travel cutbacks. Unfortunately, business travel will not return to previous levels for some time."

Just last week, KeyLime Cove of Gurnee, owned by KLCG Property LLC, filed for reorganization in U.S. Bankruptcy Court in Delaware. KLCG investors include Dave Anderson, founder of Famous Dave's BBQ restaurants. The Gurnee park, which opened in February 2008, has about 525 employees.

The park expects to continue operating, said General Manager Dale McFarland of S&L Management. With the recession, people aren't taking as many vacations or weekends away, and those who come spend less, he said.

KeyLime expects to continue its cross-promotion partnership with neighboring Six Flags and believes the opportunity to restructure its debt will leave it in a stronger position, said McFarland, who recently was named hotelier of the year by the Illinois Hotel & Lodging Association.

"We're actually looking at this bankruptcy in a positive way and are very reassured about the future," he said. "It's business as usual."

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