AP NEWS

Rochester hotels might finally break 6,000-room barrier

March 26, 2019

Demand for Rochester’s hotel rooms remains high. thanks to the Destination Medical Center initiative, conventions and sports tourneys.

After losing rooms from two downtown hotels, the Days Inn and the Holiday Inn, the Med City added 87 rooms with the opening of Candlewood Suites in 2018.

Mary Gastner, the interim executive director of Experience Rochester (Rochester’s conventions visitors and bureau), tallied 5,393 available hotel rooms at 52 city hotels at the start of 2019.

Rochester’s room total has hovered in that range for the past five years, as new hotels have opened but old ones have been demolished.

But hospitality leaders have forecasted for several years that Rochester’s hotel-room total would one day rise to 6,000. It looks like 2019 could be the year, with about 960 proposed rooms in the pipeline.

The consulting firm STR calculated Rochester’s average hotel occupancy rate at 54.8 percent for 2018. That’s down from recent years, when the rate hovered at 60 percent and higher.

The average room rate was $113.76, which, coupled with the occupancy rate, yields and average daily room revenue of about $62, according to STR’s Rochester numbers.

Epic change

Rochester patient numbers fell for a few weeks during 2018, thanks to the massive $1.5 billion transition to the Epic electronic health record system, but Experience Rochester reported that things looked good for hotel occupancy from events at the recently expanded Mayo Civic Center.

“2018 was one of the biggest years for conventions for us,” Gastner said. “Training for Epic (at the Mayo Civic Center) was big contributor for the year.”

Gastner also cited growth in medical conventions and dance competitions as highlights for the year.

“We’ve had great support from Mayo Clinic to help earn more of that (medical convention) business,” she added.

One lesson from 2018 was that the Rochester hospitality group’s previous stance of opposing the construction of “limited service” hotels — ones without a restaurant, outside of downtown — might have been misguided.

Brad Jones, the then-executive director of the city’s Convention and Visitors Bureau, told the Rochester City Council in 2014 that his group had considered requesting a moratorium on construction of such hotels.

“The big problem is that the full-service and extended stay hotels take longer and are more expensive to develop. What we saw happening last spring and this summer was developers rushing to build limited hotels too quickly,” he said in 2014. “That can scare away full-service hotels, when the market is saturated with rooms.”

Customer choice

It turns out that many visitors prefer the limited service hotels near amenities including restaurants, stores and move theaters on the southern and northern edges of Rochester.

“At first, there was some of the concern that distance was a barrier, but hotel shuttle services took care of that,” said Gastner. “We’ve found that our sports services really, really like… (the limited service hotels).”

While there has been a lot of discussion by DMC and Mayo Clinic officials about the need for higher-end, possibly five-star, hotels, calls to Experience Rochester show interest for another type of room.

“We’re getting calls from a lot of Mayo patients coming to Rochester. We’ve found that audience is very rate-sensitive,” she said.

However, wealthy executives or royal families looking for luxury digs during their time at Mayo Clinic will have more choices in the future.

The 264-room Hilton Hotel at the corner of South Broadway and Center Street represents more high-end hospitality offerings. That hotel is being developed by Harbor Bay Real Estate Advisors, of Chicago, and Titan Development & Investments, of Rochester.

Titan officials have previously described the new complex as “one of the premier hotels in the Midwest,” with ballrooms and conference rooms “that are strategically designed to meet the growing business demands of Rochester.”

Gonda topper

Another luxury hotel project promising even better access to Mayo Clinic was announced in 2018.

A “strategic collaboration” between Mayo and a prominent Singapore development firm, Pontiac Land Group, was unveiled. Pontiac and Mayo will build a seven-story hotel and add four new clinical treatment floors on top of the Gonda Building in downtown Rochester. The Pontiac Land Group is owned by the Kwee family, one of the wealthiest families in Singapore.

Construction for that project is not expected to start until late 2019. No details, including room numbers, have not been released yet.

Mayo Clinic Chief Administrative Officer and Vice President Jeff Bolton addressed questions about the Gonda/Kwee project, when it was announced.

“A lot of developers are concerned with the risk of the market. In many ways, we have to make a market in Rochester that doesn’t entirely exist today. We feel, given the growth of the Destination practice, that now is the time to do that,” he said in 2018. “We have had discussions with them (other hotel developers). Mayo’s objective is to grow the pie, not change some slices of the pie. Mayo’s success will benefit all of the providers of these services in the community.”

Andy Chafoulias, who leads Titan, supported the idea of more competition for the new Hilton project.

“We welcome Pontiac Land Group to the city and applaud their strategic joint venture with Mayo Clinic on the Gonda Building expansion, which will provide the additional clinical space and premier hotel that the market needs,” he said in a written statement. “Mayo Clinic’s growth is creating remarkable opportunities, and it is thrilling to see that successful firms, like Pontiac Land Group, believe in the vision and want to be part of it.”