Millions Poured Into Hotel Makeovers

Millions Poured Into Hotel Makeovers

By Beth Milligan

In 2012, a record-breaking 1.5 million visitors came to Sleeping Bear Dunes National Lakeshore after it was declared "the most beautiful place in America" by Good Morning America. The designation was good business for the park, but it was also good business for area hoteliers – many of whom are capitalizing on the region's exploding tourism industry by investing in property expansions and pricey renovations.

West Bay Beach, a Holiday Inn Resort, is among the latest hospitality properties to undergo a major remodel. In 2012, ValStone Partners, LLC, a Michigan-based private equity firm, purchased the hotel – which commands a prime location on West Grand Traverse Bay in downtown Traverse City – and immediately set about overhauling the aging facility.

The recently completed $4.5 million renovation updated every inch of the hotel's 179 rooms, two pools, two restaurants, lobby, meeting space and beachside patio. The makeover earned the hotel a Holiday Inn Resort designation, the first property outside of the east or west coasts to do so.

New ownership is a driving force behind several of the area's hotel upgrades, said Traverse City Convention & Visitors Bureau President Brad Van Dommelen.

"Traverse City is perceived as a hot market right now, thanks to the great media exposure we've had and our presence on national top 10 lists, including best small towns, top summer trips and best places to retire," Van Dommelen said. "Owners are investing in the market because they're seeing momentum. And there's a desire to enhance their product, because that brings a higher [room] rate."

The 39-room Howard Johnson of Traverse City and 37-room Knights Inn of Traverse City, both owned by Todd and Beth Gokey, underwent recent extensive renovations. In June, AmericInn – originally constructed in 1998 – also announced the completion of a full-scale renovation of its 47-room hotel, replacing all guest room beds and bedding, installing flat-screen televisions throughout the facility and updating paint, furniture, artwork, draperies and carpeting.

The same month, Super 8 was converted into a Boarders Inn and Suites by Cobblestone Hotels, a national franchise. The conversion was accompanied by a refresh of the hotel's 65 rooms.

Another conversion along Munson Avenue in Traverse City was the change from Days Inn & Suites to the Country Inns & Suites by Carlson.

New properties are equally – if not more – effective at capturing consumer attention as renovated ones, something the investment group behind Hotel Indigo Traverse City is banking on. The planned four-story, 105-room boutique hotel along Grandview Parkway in downtown Traverse City generated significant media coverage when it broke ground earlier this spring, with a targeted completion date of summer 2014.

The $15 million project – which will include a conference center, lobby and rooftop lounges, spa, pool, restaurant and 79 underground parking spaces – is the first new lodging facility to be introduced to downtown Traverse City in more than three decades. Currently, the Holiday Inn Resort, Bayshore Resort and Park Place Hotel are the only major hospitality centers servicing the downtown district.

"With Indigo, we're now very balanced in regards to our product offerings," said Van Dommelen. "We have hotels both on and off the water, cabins and cottages, bed and breakfast spots – you name it. With our diversity, it'll be rare that we can't find something a customer is looking for in Traverse City."

Van Dommelen believes that the number of hotel rooms in the area is now more than satisfactory to meet visitor demand.

"We could perhaps use more rooms for a few weeks in the summer," he said, "but then you have to contend with the other nine months out of the year where they might sit empty."

Instead, as evidenced by the recent construction boom, "upgrading our current product is the top priority," said Van Dommelen.

Upgraded product, of course, tends to mean upgraded pricing. Van Dommelen says there's "no question" rates have risen over the last few years, and will likely continue to do.

"Rates respond to demand," he said. "Hoteliers are going to push rates until they see demand fall off. Of course, there is a limit to what the market will bear. When occupancy falls off because rates are too high, owners will adjust accordingly."

For Van Dommelen's part, his focus – and that of his staff – is to ensure area hotels have a steady stream of customers year-round, not just in the summer. While the hospitality industry has seen a 19 percent increase since 2008 in assessment revenue – a percentage of room fees set aside for local tourism marketing, a strong metric of performance – many hotels still weather the off-season only because of their success during summer months.

"Seventy percent of our marketing budget is now being spent in non-summer months," Van Dommelen said about the TCCVB's out-of-state advertising push. "Our goal is to position Traverse City as a four-season destination. From 2011 to 2012 alone, we saw a 26.5 percent increase in out-of-state visitors. We need to continue building on that success."

And giving people a reason to visit Traverse City – whether it be for its inherent natural beauty, special off-season events or a rejuvenated hospitality industry – is the key.

"It's important to sustain a high rate of tourism during the off-season," Van Dommelen said. "The hotels depend on it for their survival."