5-month study: How do C-U hotels rate?

5-month study: How do C-U hotels rate?

Hotels start taking reservations for University of Illinois commencement weekend about a year in advance.

Kimberly Steele, whose daughter will graduate this weekend, sure wishes she would’ve known that.

“I thought booking in December would be fine,” said Steele, who lives in Branson, Mo. “I had no idea.”

When she checked Priceline for hotel prices and compared them to Memorial Day weekend rates, she was shocked at what she found:

— $284 at Days Inn, up 468 percent from $50.

— $249 at Econo Lodge, up 398 percent from $50.

— $479 at Fairfield Inn, up 183 percent from $169.

— $479 at Courtyard, up 201 percent from $159.

“I can see adjusting a rate; I live in a tourist town. Rates change with supply and demand, but nothing like that,” Steele said. “That’s not supply and demand, that’s just highway robbery.”

Each Monday for the last five months, from December through April, The News-Gazette checked weekend room rates online for 37 local hotels and saw similar increases during Champaign-Urbana’s particularly busy weekends.

During those five months, the average rate on a weekend was right around $90.

Over Mom’s Weekend, the average rate for available rooms increased to $191.

On the weekend of Ebertfest and the Christie Clinic Illinois Marathon, the average rate was $134.

Last weekend, when Garth Brooks played four shows in three days, it jumped to $166.

During those weekends, it wasn’t uncommon to see hotels double or triple their regular Friday-Saturday rates.

Hotel analysts and managers say this is how the industry works everywhere, and that they have to adjust their prices to remain competitive.

As a university town, Champaign-Urbana also has a somewhat unusual market, with some extremely busy weekends and several slow months and holidays.

‘We try to keep a fair value’

At Champaign’s Courtyard by Marriott, General Manager Lynn Hursey summed up the situation from the hotels’ perspectives.

“We look at the market and see where everybody else is priced at, and we have to remain competitive with that,” Hursey said. “When the demand is there, like any other business, that’s when the rates really go high.”

Hotels set their prices using a variety of factors, including their star rating and brand, what competitors are doing and expected demand.

“It’s all put into a computer, and there’s different algorithms that help them decide how to price the hotel,” said Lisa Thomas, a professor at DePaul University specializing in hotel revenue management.

Most hotels use software from STR. They provide their occupancy, rate and revenue data to the Tennessee-based travel research company, and in turn, STR provides regular, aggregated reports on what competitors in their market are doing.

How hotels use this data and weigh these factors varies.

In general, The News-Gazette’s research showed that lower-end hotels tended to react more strongly to higher demand and thus, increase prices more dramatically.

On the other end, the Illini Union Hotel stood out for its steady prices. Its rates were always between $89 and $134, though prices weren’t available for most weekends because it was sold out.

As a hotel fills up for a specific weekend, it also tends to continue increasing rates the closer it gets to Friday.

“Typically, about six months ahead, they will set a target price, then review it probably once a month until a couple months before,” said Hugo Tang, a hospitality professor at Purdue. “Then it will look at it more frequently, probably every week. Within two or three weeks, every day.”

If a hotel isn’t filling up as quickly as expected, it could also adjust prices downward, Thomas said.

Many hotels are operated by third-party management companies, not by corporate headquarters.

For example, Courtyard by Marriott is run by TMI Hospitality, which manages nearly 200 hotels of various brands across 26 states.

“We have a specific revenue management department that works closely with each property to determine a good rate strategy,” Hursey said.

Other hotels, like Drury Inn, are operated entirely in-house, though that doesn’t necessarily prevent steep rate increases.

“It’s kind of a combination based on the local market, and then our corporate office, to help us implement those changes,” said Nick Nelson, Drury Inn’s manager. Rates “depend on availability and supply and demand. We try to keep a fair value.

“Of course, during special event weekends, as the demand goes up, those Friday and Saturday nights will get much more expensive.”

After hearing some of the rate increases, Thomas said those weren’t unusual.

“If my dad wants to come visit me in Chicago, I tell him he can’t come during the National Restaurant Association’s convention week because you’re going to pay $300 to $500 a night,” she said. But other times, he could stay at the “Hilton right across from Grant Park” for $100 to $150.

The hotel industry is similar to the airline and restaurant businesses, she said. Restaurants will lower prices during happy hour or early in the week, an attempt to draw more customers during slow times.

“You can only sell those rooms once,” Thomas said.

IHSA issue ‘overexaggerated’

Champaign-Urbana hotels have been accused of price gouging in the past.

When the IHSA boys’ basketball tournament left town for Peoria in 1996, the hotels took the brunt of the blame.

When C-U tried to bring it back in 2015, it received guarantees from a dozen hotels to provide lower rates for IHSA guests.

Visit Champaign County’s Terri Reifsteck insists that hotel concerns were not the primary reason the tournament left.

“I do think the county had gotten complacent. Peoria came in and offered something new and different,” she said. “Hotel pricing is one of the more over-exaggerated reasons.”

‘Market has too many rooms’

An obvious solution to high hotel prices would be to increase supply.

In November, Champaign city officials approved a proposal for a new boutique hotel at 401 N. Neil St.

And Urbana is in talks with a developer to redevelop the former Landmark Hotel into a boutique hotel.

But Champaign County has added 640 rooms from six hotels since 2011, and according to data provided by STR, the average daily rate has increased in that time from $74 in 2011 to $84 in 2016.

Meanwhile, the annual occupancy rate for county hotels in that span never reached 60 percent and in 2016 was just 52.6.

“Ideally, you’d be at 70 percent or above. If you’re running 85 percent or higher, you’re coining money,” said Peter Tomaras, a local hotel consultant and former hotel owner.

Depending on a hotel’s financing, occupancy rates in the 50s and 60s could be problematic.

“The market has too many rooms,” Tomaras said. “People don’t think so when it comes to homecoming and Mom’s Day, but the fact is there are too many hotels in this market that are struggling.”

While local hotels may be busy now, they don’t do so well when students are on break or on many of the major holidays, he said.

In December, the monthly occupancy rate dipped to 36.2 percent, the lowest in the past five years, according to STR.

Tomaras said Visit Champaign County does a good job bringing in events year-round, which helps balance the calendar.

A better football team would also help.

Hotels used to sell out every football weekend, Tomaras said, but “now the football team is so terrible that the only football weekends that sell out are Dad’s Day and homecoming.”

For Saturday’s commencement, more than 33,000 tickets have been picked up. Hopefully, guests have already have made their accommodations — among the few rooms left were going for $249 at Econo Lodge and $265 at Red Roof Inn on Friday.

As for Kimberly Steele, she’s glad she reached out to Visit Champaign County in December, which helped her secure a $99 rate at La Quinta Inn.

“Kudos to La Quinta for being reasonable,” Steele said.

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John Palen wrote on May 07, 2017 at 7:05 am

This was an interesting story, but I had to read it online. The print version started on page 1 with white-on-black and red-0n-black type. These are only marginally readable. Even black-on-gray, which I see used in the paper often, will turn many readers away. You do your readers and your reporters a disservice by putting up this kind of barrier. The first rule of newspaper design is "if it's hard to read, it's bad design." 

Bra adamant wrote on May 08, 2017 at 2:05 pm

Since when has the News-Gazette cared about....anyone? Outsourcing the paper, not listening to what the people want. Oh well, the paper will be dead within 5 years TOPS. If they continue to run it poorly, I won't make 2 years.

cjw61822@hotmail.com wrote on May 07, 2017 at 9:05 am

This is news how?  Try booking a room in Indy Memorial day weekend......see how much that costs..... apparently the NG is  against the law of supply and demand.ba

BART15 wrote on May 07, 2017 at 10:05 am

This is the norm anywhere in the country on a special event week. Why do the folks in C-U always think this is only done here?

yates wrote on May 08, 2017 at 9:05 am

"We try to keep a fair value"....what a load of crap. It's price gouging and no different then when the oil companies raise gas prices at a whim. Lucky for them people have come to accept it as the norm.

Bra adamant wrote on May 08, 2017 at 2:05 pm

Agreed. Oh...sorry for the pun....

eastsideexp wrote on May 08, 2017 at 10:05 am

Our solution to the high rates in CU has been to stay in Bloomington-Normal and make the easy drive on Interstate 74.

The two night minimums at the inflated prices, when we needed just a single night,  made us take our $$ to another area of the state.  We can easily afford the higher prices, but just choose not to be taken advantage of by the hotels in CU.

Bra adamant wrote on May 08, 2017 at 2:05 pm

Since when is there a hotel in the Iliini Union???? Maybe advertising would help. Never even knew it existed, and I live within 1/2 mile!!!!!

bones1 wrote on May 08, 2017 at 5:05 pm

The Illini Union Hotel has been there for a long time.  It's pretty nice,  good location, and not terribly expensive. If you need to be close or on campus it is a great place!

wykhb wrote on May 09, 2017 at 3:05 pm

The Illini Union Hotel maintained a more steady and fair rate.   Is that hard to do when your building and property upkeep, utilities and security, and student employees are basically paid for by taxpayers and student fees?   That's like saying that DIA keeps football and basketball tickets at a more fair rate than the NFL and NBA.   LOL