By Tom Daykin of the Journal Sentinel – August 4, 2014
With this month’s opening of their new 381-room hotel, Potawatomi Hotel & Casino officials expect a big increase in casino customers staying overnight in Milwaukee.
That means more revenue for the Forest County Potawatomi Community, which owns the entertainment and hotel complex that includes restaurants, banquet rooms and the 500-seat Northern Lights Theater. It’s the latest stage in the evolution of a business that was launched in 1991 as a 2,000-seat bingo hall.
It also could cut into revenue for nearby hotels that traditionally have gotten some action from the Menomonee Valley gambling mecca.
“Any new hotel is going to have an impact on the overall lodging supply in the downtown area,” said Greg Hanis, a hotel industry consultant. “Some of that (casino) business is currently staying at downtown hotels.”
“Supply always has an impact,” agreed David Loeb, a hotel industry analyst at Robert W. Baird & Co.
The upscale hotel is expected to draw new patrons to the casino at 1721 W. Canal St.
It will expand the casino’s customer draw from a 25-mile radius to a 100- to 150-mile radius, said Hassan Abdel-Moneim, hotel director, during a Monday media open house at the 19-story hotel. It opens for guests on Aug. 18.
Leisure travelers from places like Madison, the Fox Valley and the Chicago area will likely book rooms not just to visit the casino but also to attend lakefront festivals and other events, he said.
“There are a lot of reasons to come to Milwaukee,” Abdel-Moneim said.
In addition, the hotel already has booked three group events that will generate business for other hotels, he said.
That includes a veterans motorcycle rally in the summer of 2016 that needs about 1,000 rooms, Abdel-Moneim said. The Potawatomi Hotel will be the event’s main hotel, with 300 rooms, while the remaining 700 rooms will be at other local hotels.
“We’re starting to bring business to the city,” he said. “Our focus is on regional and national business.”
The $97.5 million Potawatomi Hotel includes Locavore, a full-service casual restaurant. The hotel’s other features include a lobby bar, Stone Creek Coffee shop and 12,000 square feet of meeting rooms aimed mainly at business groups and associations.
The hotel was built on nontribal land, and is paying property and room taxes, while creating 230 full- and part-time jobs. Unlike the casino, which is attached with two covered walkways, the hotel is smoke free. Gilbane Building Co. is the general contractor and PNC Bank provided financing.
The building has 365 standard rooms, along with 16 suites. The average daily rate will range from $150 to $250, depending on the season, said Ryan Amundson, Potawatomi Hotel & Casino spokesman. The 3,000-square-foot presidential suite — about nine times the size of a standard room — costs $4,000 a night.
The hotel will likely draw people who wouldn’t otherwise stay overnight in Milwaukee, Loeb and Hanis said.
But Hanis, who operates Hospitality Marketers Inc., said a 2012 estimate by the Potawatomi tribe’s consultant that new guests to Milwaukee will account for 90% of the hotel’s business is “very hard to believe.”
Without conducting his own analysis, Hanis’ best guess is that the share of new guests will be closer to 50%.
Hotels within a mile or so of the casino are the most likely ones to lose business to the Potawatomi Hotel, Hanis said. The DoubleTree Milwaukee Downtown, 611 W. Wisconsin Ave., and Hilton Milwaukee City Center, 509 W. Wisconsin Ave., might be the most vulnerable, he said.
The 243-room DoubleTree has done “fairly well” in attracting casino patrons, said Jeff Welk, general manager.
“At this point, obviously, a lot of that will go away,” Welk said.
That won’t be a huge blow, he said.
This year, room bookings tied to events the DoubleTree promotes with the casino are expected to make up about 4% of the hotel’s total bookings, Welk said. The DoubleTree also draws other casino customers who book rooms on their own, and Welk hopes to continue to capture some of that business.
Still, no business wants to lose revenue.
Marcus Corp. Chief Executive Officer Greg Marcus told analysts during a July 24 earnings call that he didn’t know how the new hotel would affect the company, which operates the Hilton and two other downtown hotels.
“Time will tell what impact this hotel will have on the market,” Marcus said, according to a call transcript. “They believe that the majority of their occupancy will represent new demand to the marketplace as people come to gamble at their casino. We obviously hope they are right.”
Marcus said last year that the Potawatomi Hotel was among several downtown projects that were creating “an unjustified increase in supply” that could hurt the company unless demand increased in the downtown hotel market.
One concern for other downtown hotel operators is the possibility of the Potawatomi Hotel aggressively cutting room rates during slow times, Loeb and Hanis said.
Some casinos view their hotels as “loss leaders” and are willing to offer deep discounts to get gamblers to stay overnight, Hanis said.
However, both Loeb and Hanis also said downtown Milwaukee hotels are enjoying strong occupancy rates.
“Frankly, demand has been better than I expected,” Loeb said.
