Hotels hoping to open by DNC facing tight deadline, development challenges

Real Estate Spotlight

Since the announcement this spring that Milwaukee will host the Democratic National Convention in July 2020, several developers have set a goal to open new hotels in the area prior to the convention.

The window is closing fast, however, on their ability to accomplish that goal. That’s according to a group of industry consultants, who also detailed the challenges those projects will face in the months leading up to the DNC.

The national spotlight will be on Milwaukee next July, as thousands will be in town to participate in and cover the 2020 DNC. But to even qualify as a host, the city had to guarantee a minimum of 15,000 hotel rooms within 40 minutes of the downtown convention center district and Fiserv Forum. However, this doesn’t account for the many thousands more that will undoubtedly flock to the city for the convention and related events.

It’s both the large demand for rooms during the convention and the national exposure the event itself offers that has developers aiming to complete their hotel projects by then.

To realistically reach this goal, developers should have things like government approvals and financing already lined up, said Greg Hanis, hotel industry analyst and president of New Berlin-based Hospitality Marketers International Inc. Hanis also recommends a hotel be open and operating at least 30 days, if not 60 days, in order to work out any issues prior to the big event.

“You’re really getting close on being able to get these things open, and the advice I have for the developer is if you don’t have everything in order right now and you’re trying to push it to get (the hotel) open for the DNC, it might be very difficult,” he said during an interview in late May.

Michael Hool, president of Strategic Hospitality Resources LLC, an affiliate of HMI, agreed with Hanis. He added a limited-service hotel typically takes nine to 12 months to build. When adding food and beverage components to the project, construction takes at least 12 months.

Hotel projects that were recently unveiled and are also targeted to be open prior to the DNC include the 80-room Ikon Hotel at 2100 W. North Ave., Milwaukee; a 40- to 50-room boutique hotel planned for 419 W. Vliet St., Milwaukee; and a 107-room Holiday Inn Express & Suites at 10201 W. Lincoln Ave., West Allis.

The developers who spoke with BizTimes for this story made clear it was not imperative their hotels open by the DNC, though it would be a nice bonus.

For instance, Kalan Haywood, president of Haywood Group LLC and developer of the Ikon, said it would be “icing on the cake” if the development finished up in time for the convention. However, his focus is on the long term for the hotel, which would be built in a former Sears building on the city’s north side.

Haywood said he’s owned the building for about a year-and-a-half and had always aimed for a 2020 project completion. However, the announcement of the DNC provided an even more specific target for an opening date.

Haywood is still working on the capital stack for the Ikon project. A $4 million city loan was recently approved by the city, and now Haywood has turned his attention to incentives offered through the Opportunity Zone program. He’s also seeking historic tax credits.

Patrick Prabhu, one of the developers of the hotel on West Vliet Street, noted a couple challenges that may prevent his project from opening before the convention. The hotel Prabhu is proposing would involve renovating an old warehouse building, and still needs approvals from the city.

Specifically, Prabhu said construction costs are increasing due to a shortage of labor and rising material costs. This comes, in part, from the sheer amount of demand for new development projects.

Beyond the shortage of construction workers, the service industry is also facing challenges with finding enough experienced employees, noted Lindsey Kaptur, president of LEK Hospitality LLC, another HMI affiliate.

Kaptur said a well-run hotel needs more than just people in uniforms. Service staff need experience and proper training, especially if their first big task will be something as large as a national convention. She said a shorthanded or unready staff could tarnish the hotel’s reputation.

Prabhu said it was more important for everything to run well in the hotel than for it to be open in time for the DNC.

“We have to get the hotel right, the configuration right and the amenities right,” Prabhu said. “It would be nice (to open by the DNC) if we can, but we can’t sacrifice quality to get it done.”

Since the announcement this spring that Milwaukee will host the Democratic National Convention in July 2020, several developers have set a goal to open new hotels in the area prior to the convention.

The window is closing fast, however, on their ability to accomplish that goal. That’s according to a group of industry consultants, who also detailed the challenges those projects will face in the months leading up to the DNC.

The national spotlight will be on Milwaukee next July, as thousands will be in town to participate in and cover the 2020 DNC. But to even qualify as a host, the city had to guarantee a minimum of 15,000 hotel rooms within 40 minutes of the downtown convention center district and Fiserv Forum. However, this doesn’t account for the many thousands more that will undoubtedly flock to the city for the convention and related events.

It’s both the large demand for rooms during the convention and the national exposure the event itself offers that has developers aiming to complete their hotel projects by then.

To realistically reach this goal, developers should have things like government approvals and financing already lined up, said Greg Hanis, hotel industry analyst and president of New Berlin-based Hospitality Marketers International Inc. Hanis also recommends a hotel be open and operating at least 30 days, if not 60 days, in order to work out any issues prior to the big event.

“You’re really getting close on being able to get these things open, and the advice I have for the developer is if you don’t have everything in order right now and you’re trying to push it to get (the hotel) open for the DNC, it might be very difficult,” he said during an interview in late May.

Michael Hool, president of Strategic Hospitality Resources LLC, an affiliate of HMI, agreed with Hanis. He added a limited-service hotel typically takes nine to 12 months to build. When adding food and beverage components to the project, construction takes at least 12 months.

Hotel projects that were recently unveiled and are also targeted to be open prior to the DNC include the 80-room Ikon Hotel at 2100 W. North Ave., Milwaukee; a 40- to 50-room boutique hotel planned for 419 W. Vliet St., Milwaukee; and a 107-room Holiday Inn Express & Suites at 10201 W. Lincoln Ave., West Allis.

The developers who spoke with BizTimes for this story made clear it was not imperative their hotels open by the DNC, though it would be a nice bonus.

For instance, Kalan Haywood, president of Haywood Group LLC and developer of the Ikon, said it would be “icing on the cake” if the development finished up in time for the convention. However, his focus is on the long term for the hotel, which would be built in a former Sears building on the city’s north side.

Haywood said he’s owned the building for about a year-and-a-half and had always aimed for a 2020 project completion. However, the announcement of the DNC provided an even more specific target for an opening date.

Haywood is still working on the capital stack for the Ikon project. A $4 million city loan was recently approved by the city, and now Haywood has turned his attention to incentives offered through the Opportunity Zone program. He’s also seeking historic tax credits.

Patrick Prabhu, one of the developers of the hotel on West Vliet Street, noted a couple challenges that may prevent his project from opening before the convention. The hotel Prabhu is proposing would involve renovating an old warehouse building, and still needs approvals from the city.

Specifically, Prabhu said construction costs are increasing due to a shortage of labor and rising material costs. This comes, in part, from the sheer amount of demand for new development projects.

Beyond the shortage of construction workers, the service industry is also facing challenges with finding enough experienced employees, noted Lindsey Kaptur, president of LEK Hospitality LLC, another HMI affiliate.

Kaptur said a well-run hotel needs more than just people in uniforms. Service staff need experience and proper training, especially if their first big task will be something as large as a national convention. She said a shorthanded or unready staff could tarnish the hotel’s reputation.

Prabhu said it was more important for everything to run well in the hotel than for it to be open in time for the DNC.

“We have to get the hotel right, the configuration right and the amenities right,” Prabhu said. “It would be nice (to open by the DNC) if we can, but we can’t sacrifice quality to get it done.”

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