Dec. 03--Chicago's booming hotel business is getting another competitor -- a 198-room Cambria Hotel Suites, planted plumb on top of the Loop's historic Oriental Theatre.
Choice Hotels International says a 21-story hotel above the theater at 32 W. Randolph St. is expected to open in September 2017 and will offer "upscale service at an affordable price."
The hotel announced Wednesday morning would add to the 2,300 rooms expected to open in downtown Chicago this year and another 2,500 rooms that are likely to be added in 2016, according to hotel consultant Ted Mandigo of TR Mandigo Co.
The additions come as the downtown hotel room occupancy rate through the first 10 months of 2015 hits 78 percent, the highest Mandigo has seen in 40 years.
Maryland-based Choice Hotels says Cambria, across the street from the Block 37 mixed-use development, will cater to business travelers and will include a bistro called Social Circle created by chef Michael DeMaria, as well as 2,500 square feet of meeting space for conferences.
Murphy Asset Management, which also developed the Hyatt Centric in the Loop and the Hampton Inn Chicago Motor Club, will oversee the conversion of office space above the Ford Center for the Performing Arts Oriental Theatre into the hotel. It originally looked to make the space into apartments.
Company President John T. Murphy said he put those plans on hold when it became clear that Block 37 was adding 690 apartment units across the street. The hotel development is a "very safe" bet, he said, adding that he does not expect all of the hotel developments announced by competitors over the last year to be completed. Construction of the Cambria should start within a couple of months, he said.
Built in 1926, it has a 2,253-seat theater on the first seven floors that hosts Broadway shows. Upper floors were originally designed by architects Rapp Rapp to be used as a Masonic temple but have been used as office space since the 1970s, according to marketing material circulated by commercial real estate firm CBRE two years ago. The building's historic facade will not be affected by the hotel development, Murphy said.
Michael Murphy, senior vice president of upscale brands at Choice Hotels, said Chicago's status as one of the country's largest business centers makes it "the perfect city for the rapidly expanding Cambria brand."
The Cambria is being developed as several other large downtown hotels are under construction, including the 452-room London House at 85 E. Wacker Drive and Kimpton House at 39 S. LaSalle St. That has prompted fears that a supply glut could eventually send prices tumbling back down.
Demand in 2015 is up 5 percent, with new room construction running at 6.5 percent, a trend that Mandigo said was likely to continue into 2016, when demand is expected to increase by 4.5 percent while room supply increases by 7 percent. That will likely lead to "a little drop in occupancies, but nothing too serious," Mandigo said.
Overall, he added, "In 40 years, I have never seen numbers as strong as this in the Chicago market, but on the other hand, I've never seen construction growth like this either."
Despite several years of good times, Mandigo cautioned that Chicago's hotel industry hasn't fully recovered to its pre-recession level and is still "climbing back out of the hole." The $210 average rate per occupied room that he expects hoteliers to achieve in 2015 is less than the $207 per occupied room they earned in 2007, once inflation is included, he said.
Increasing average rates in recent years reflect the construction of more upscale hotels and not necessarily existing hotels' ability to command higher rates, he added.
Both Mandigo and John R. Karver, senior vice president of hotel brokerage and investment sales at CBRE, said the hotel trade was benefiting from the decisions of major companies to relocate their headquarters to Chicago in recent years.
"The future looks promising," Karver said, adding that the level of construction was "about right" and "could be absorbed by the Chicago market. As long as we don't have a downturn in the economy -- and that would hurt hotels, whether we add rooms or we don't."
kjanssen@tribpub.com
