How Twin Cities’ Super Bowl hotel performance stacks up

Since 2011, STR has looked at the impact the Super Bowl has on the host city from a hotel perspective, both in terms of absolute performance and year-over-year change.

We have been particularly interested to see the impact this year on the Minneapolis/St. Paul market, the third-smallest hotel market of the last eight Super Bowls, and the smallest since New Orleans in 2013. The size of the market, among with other factors, led to high expectations of potential revenue-per-available-room increases on Super Bowl weekend.

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Marriott Opens 5th US Moxy Hotel

Marriott International has opened Moxy Minneapolis Uptown, a 125-key hotel in Minneapolis. Graves Hospitality owns the property, while Collage Architects and Yellow Dog Studios designed it.

Located at 1121 W. Lake St. in the heart of Uptown, the six-story building is situated on the corner of Lake Street and Emerson Avenue. The new hotel offers convenient access to various bike paths, restaurants and entertainment venues, such as Minneapolis Institute of Art, Mall of America, U.S. Bank Stadium and Minneapolis Sculpture Garden. Minneapolis-St. Paul International Airport is approximately 10 miles away.

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January 2018 Compass – Hotel Market

Twin Cities’ Hot Hotel Market Cools; Slower Growth Projected As Market Adjusts to New Supply

After boasting robust growth in occupancy and average daily rates (ADR) for the past seven years, the hot streak has ended and the Twin Cities hotel market is finally cooling. The long cycle has peaked, as the market simply could not sustain the torrid pace of activity. A slower pace of growth is now expected.

The slowdown can largely be attributed to the surge in new construction as supply growth is finally outpacing demand. The occupancy rate, ADR, and revenue per available room (RevPAR) each dipped. Rates, however, are holding relatively steady despite the drop in occupancy.

Fueled by a healthy economy, demand is solid by both business and leisure travelers. With more available rooms, however, it is a bigger pie with increasing competition. Hitting the peak does not mean that the market will decline quickly. Solid performance is projected in 2018-19 with high profile events helping to fill rooms. However, the market will experience slower growth moving forward until it absorbs the new capacity. Many investors and developers remain cautiously optimistic.
The development boom continued, with approximately 3,900 new rooms delivered market wide so far during this cycle and another 3,000 rooms in various stages of development. Developers continue pursuing prime sites in attractive submarkets. However, some pulled plans due to overbuilding concerns and increasing construction costs. Also, financing may be more difficult to obtain for some projects. Overall, five new hotels totaling 538 rooms opened in 2017, with seven more totaling 754 rooms set to open in the first half of 2018. Downtown Minneapolis: Remains a hotbed for development, with 1,457 rooms delivered since 2015 plus 1,100 rooms proposed or underway. Major Events Driving Demand: 2018 Super Bowl, 2018 ESPN X Games, the 2018 National Baptist Convention, and the 2019 NCAA Men’s Final Four.

Projects include:
• Dual-branded 75-room Tru by Hilton & 125-room Home2 Suites by Hilton (Developer: JR Hospitality and Hawkeye Hotels)
• Element Hotel, 160 rooms (Developer: United Properties for the Lion Hotel Group)

Bloomington/Mall of America/Airport Submarket: The spike in construction continued, with 1,766 rooms delivered since 2013 and more than 1,500 rooms proposed or underway. Projects include:
• Holiday Inn Express, 171 rooms in Bloomington (Developer: JR Hospitality and Hawkeye Hotels)
• InterContinental, 300 rooms at the Minneapolis-St. Paul International Airport (Developer: Graves Hospitality)

Downtown St. Paul Submarket: Also experiencing demand, with approximately 4,500 new rooms underway or proposed. The
Midway United FC Soccer stadium mixed-use development includes 400 planned rooms.

Although it remains a seller’s market, values have likely peaked and investors are more cautious and selective. Properties are still trading, but there is a widening buy-sell gap that has slowed transaction activity as buyers negotiate to push prices down. That being said, investors are still pursuing prime properties in attractive submarkets.

Notable Sales:
• KHP Capital Partners purchased The Hotel Minneapolis from Chesapeake Lodging Trust for $44 million.
• First Hospitality Group acquired the Hilton Garden Inn Minneapolis Airport from Colony NorthStar for $33 million.
• Howell Motel Development sold the Holiday Inn Express & Suites Shakopee to SBM Hospitality for $10.3 million.

Developers continue building fewer-frills, select-service and extended-stay hotels, which are efficient and profitable. Many are focusing on the tech savvy Millennial and “modern-day” travelers. Examples include the Moxy Uptown – Uptown’s first hotel, Radisson Red, Hilton’s Tru and AC Hotels by Marriott. As competition accelerates, hoteliers are differentiating their properties to draw this next generation of travelers.

Another growing trend is dual-brand hotels where operators double up offerings at one property. An example is Tru by Hilton and Home2Suites by Hilton.

While the effect of Airbnb on traditional hotels is sometimes difficult to quantify, the sharing economy is diverting some demand away from traditional hotels. Airbnb typically has more of an impact in major leisure travel markets and for event-driven stays like the Super Bowl. Meanwhile, more cities are attempting to regulate Airbnb and similar platforms.

Solid performance is anticipated in ‘18 and ‘19 with global and national events driving business. The 2018 Super Bowl will put Minneapolis in the international spotlight and fill thousands of rooms. The end of the long cycle was inevitable, however. The question is how long it will take the market to absorb the new product. The market is not overbuilt but needs an adjustment period – or a “reset” – for demand to catch up with new supply. Occupancy will fall quicker than rates because more product is coming online. Some discounting of rates will occur, however, due to new competition. Development will slow amid overbuilding concerns and rising construction costs. Investors will continue seeking prime assets in key submarkets.

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Hawkeye Hotels plans to build a Hampton Inn in Cedar Falls

Hawkeye Hotels has filed plans in Cedar Falls for a six-story Hampton Inn at a prominent downtown location, the Corridor Business Journal reported. The Coralville firm is seeking to build the 120- to 130-room facility on a 2.5-acre site at the northwest corner of West First and Main streets, where the Broom Factory Restaurant once stood.

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Choice to acquire WoodSpring Suites for $231 million

Choice Hotels International (NYSE: CHH), one of the world’s largest hotel companies, today announced that it has reached a definitive agreement to acquire the brand and franchise business of WoodSpring SuitesSM from WoodSpring Hotels Holdings LLC, a portfolio company of Lindsay Goldberg, for approximately $231 million, subject to customary adjustments. The acquisition will add nearly 240 extended-stay hotels in 35 states to the Choice Hotels portfolio, creating an extended-stay portfolio of more than 350 properties with existing brands, MainStay Suites® and Suburban Extended Stay®.

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Downtown plan for dual-brand hotel gets the go-ahead from city

A plan to convert a vacant eight-story office building in downtown Minneapolis into a 203-room, dual-branded hotel is moving ahead after getting city approval for the project.

The Star Tribune has an update on the proposal by JR Hospitality and Iowa-based Hawkeye Hotels, which plan to open a Hilton Tru and Home2 Suites hotel at 317 Second Ave. S. The Minneapolis Planning Commission last week signed off on the idea, and the developers plan to close on the property later this month.

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Great Wolf Lodge opens for business in Bloomington

Following a 10-month, $30 million renovation, Great Wolf Lodge has opened to the public with a new adventure park, mini bowling alley and several new restaurants, including a Dunkin’ Donuts.

Chicago-based Great Wolf Resorts Inc. acquired the former Water Park of America near Highway 77 and Interstate 35W in February for $39 million. It then closed the Radisson-flagged hotel and worked quickly to rebrand and renovate the property in order to open before the Super Bowl.

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First look at Homewood Suites opening in historic downtown Milwaukee building

The Hilton Homewood Suites Milwaukee opened Dec. 14 after a more than $22 million restoration of a historic building. See the attached slideshow to get your first look inside downtown Milwaukee’s newest hotel at 400 N. Water St. in the building that in the past hosted Brett Favre’s Steakhouse and Joey Buona’s restaurant.

“Historic renovations are always tedious and take a lot of work, but we could not be happier with the end product,” said S.R. Mills, president of Kenosha-based Bear Development LLC, which undertook the project.

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