CINCINNATI - The General Manager of Horseshoe Casino Cincinnati told local real estate professionals Friday that the downtown hotel market needs more price competition.
The comments are likely to reverberate in the downtown hotel industry, where rising occupancy and room prices have prompted investors to ramp up the development of new properties. Kline said that could be good for the local tourism industry, if hotel competitors are willing to sacrifice room rates for higher occupancy.
“I can’t fill tens of thousands of rooms at $110 rates,” said Kevin Kline, in an address to the University of Cincinnati’s Real Estate Roundtable at Kenwood Country Club. “If somebody offered me an $80 rate I could probably fill a lot more hotel rooms and I could probably drive you from 70 percent occupancy … to 85 percent.”
Kline’s comments were part of a discussion on the downtown hotel market, presented by the UC Real Estate Center and Program. That discussion explored the roughly 1,200 new hotel rooms that are planned or under construction in and near downtown, and whether demand will surge to meet that rising supply.
“We were clearly due for new hotels,” said Tom Banta, managing director of Corporex Realty & Investments LLC, a Covington–based real estate company whose Commonwealth Hotels unit owns and operates 21 hotels in 15 states and the District of Columbia.
The average rate for a hotel in downtown was $135 in 2011, Banta said.
Banta said downtown hotels improved occupancy rates from below 50 percent in 2001 to nearly 73 percent by 2011. Since then, two hotels with 290 rooms have been built and three hotels with more than 500 rooms are under construction. At least four more hotels and 500 more units are in the pipeline.
“If these all get built and you don’t change demand … then your occupancies would be back down to the 50 percent range,” Banta said. “The fact that people are returning to downtown Cincinnati, with the casino, the Banks, all that, I think we’re going to see that continued growth” in demand.
Through a partnership with a handful of hotels, Horseshoe Casino has filled 38,000 hotel room nights in downtown properties in its first 10 months in business, Kline said. Banta said that’s about 5 percent of total demand for downtown hotel rooms.
Kline said the casino’s parent company, Rock Ohio Caesars LLC, has room on its downtown property for “a couple hundred” hotel rooms but has resisted the temptation to build its own hotel for the good of the downtown economy.
He said it would cost Horseshoe as little as $35 a night for rooms booked in an on-site hotel, but he’d like to see the new crop of downtown hotels bring prices down to a low enough level where it brings more tourists to his property and other Cincinnati attractions.
“Competitiveness is going to be good for the city,” he said. “I think that can help stimulate more demand.”