Suite Dreams

With the Trump opening and more luxury spots on the way, the competition in the city among high-end hotels for big-spending travelers—VIPs, celebrities, the garden-variety rich—is hotter than ever. And the secret to victory? Give the guests what they want

By Noah Isackson

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City of splendor: Behind the concierge desk at The Peninsula is a mural by the French artist Gerard Coltat with Chicago buildings as the backdrop.

Several years from now, those may be remembered as the good old days. "It's still early," says Rohit Verma, a professor at Cornell University's School of Hotel Administration. "But it would be safe to describe the upcoming competition as somewhere between healthy and fierce."

In the next few years, the total number of high-end hotel rooms could nearly double if the Elysian (188 rooms), the Mandarin Oriental (250 rooms), the Shangri-La (223 rooms), Canyon Ranch (126), and the Trump (339 rooms) stick to their current construction plans and, just as important, make good on their pledge to compete for the five-star, five-diamond rating. (Overshadowing this, of course, are the current slump in the residential housing market and the subprime mortgage crisis, which have once-eager lenders now rethinking their finance plans. Since each hotel is a "mixed-use property," combining condos and hotel rooms, financiers cannot overlook the weak housing market when they review their loans. At presstime, for example, the Mandarin Oriental, responding to media reports of unpaid bills, said that a construction loan had been delayed due to the national credit meltdown. Groundbreaking, originally scheduled for last August, was pushed to January. The Trump project, meanwhile, was also reporting slow condo sales.)

As for demand: The number of occupied hotel rooms in Chicago has grown every year since the September 11th attacks, with the most recent annual data representing an all-time high: About 75 percent of the city's 30,000 rooms were occupied over the course of 2006, according to the Chicago Convention and Tourism Bureau. (Luxury hotels declined to release occupancy figures.) Meanwhile, in the past six years, the number of occupied rooms in Chicago has grown at a rate of 5 to 7 percent annually, though some high-end hotel operators point out that their sector typically grows at a better pace. "There will be competition among hotels, but it will be friendly," Trump said in a phone interview. "Each one makes the other better."

Hotel optimists also take heart from bullish reports on baby boomer spending and from the sense that Chicago is no longer just a convention town, but a place with international tourist attractions (Millennium Park, renowned restaurants, the weak dollar, et cetera) and a shot at landing the 2016 Summer Olympics.

In addition, brands like Trump, the Shangri-La, and the Mandarin Oriental, which have established themselves in other markets, are betting that many of their guests will follow them to Chicago. "Let's put it this way: If the increasing demand continues at the 5- to 7-percent range over the next three years, I'm not worried that it will take long for the increased supply to be absorbed," says Stephen Darling, the regional vice president for Shangri-La Hotels.

Of course, that confidence comes from an executive whose brand will certainly benefit from its newcomer status. "It's only natural that people are going to try the new places," says Maria Razumich-Zec, the general manager at The Peninsula Chicago. "When we came into town [in 2001], the Four Seasons and Ritz-Carlton guests tried us. Some stayed and others went back, and I think the exact same thing will happen with the Trump Hotel, the Mandarin, Shangri-La, the Elysian, and the Canyon Ranch." Then she adds a quick jab: "When the new hotels come online, check them out—and then check them out six months later, nine months later, and you'll see a very different product."

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