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HOTEL OPERATOR MARKET INFORMATION
Chicago O’Hare International Airport
www.flychicago.com
Table of Contents
INTRODUCTION 5
CHICAGO ECONOMIC OVERVIEW 9
O’HARE AIRPORT INFORMATION 15
Introduction
5
FULL SERVICE HOTEL (CORE)860 rooms (current)42,300 sf of conference and meeting space and ballroom
Post-renovation program TBD, will include leisure facilities, room service, upscale all-day dining outlets, and other amenities
FULL SERVICE HOTEL (T5)300-400 rooms25,000-65,000 sf of conference space, meeting space, and ballroom
Includes a spa, room service, upscale all-day dining outlets, and other amenities
Exact location TBD
6
Introduction
7
EXISTING HOTELThe Existing Hotel was developed in 1970. It is the only hotel on Airport-owned land. The Upper Up-scale hotel currently offers 860 rooms and approx-imately 44,000 square feet of meeting space. It is directly connected to Terminals 1, 2, and 3 by walk-way, and by the Airport Transit System (“ATS”) to Terminal 5. The Existing Hotel also features:
• All-day dining outlet• Variety of retail outlets• Marketplace café• Sports bar• In-room dining• Indoor pool• Fitness center• Business center• Connectivity to Chicago Transit Authority Blue
Line train to the Loop (Downtown)• huttle available for local travel and international
terminals• Close proximity to regional bus center with
access to Milwaukee, Springfield, Champaign-Ur-bana, etc.
The current lease agreement for the Existing Hotel expires on December 31, 2018, and the anticipated effective date for a new Management Agreement is January 1, 2019. Operations with the selected Op-erator will begin on this date, and CDA will conduct renovations to the Existing Hotel in phases to ensure a portion of the Existing Hotel remains operational at all times.
NEW HOTELCDA will develop the New Hotel near Terminal 5, with an anticipated construction start of 2019. The anticipated opening date of the New Hotel is 2022. The anticipated effective date for a new Manage-ment Agreement is January 1, 2019, the Technical Services Assistance would commence upon contract award. These dates are subject to change.
The City of Chicago Department of Aviation (“CDA”) is considering the renovation of an existing hotel (“Existing Hotel”) and development of a new hotel (“New Hotel”), both of which would be CDA-owned and privately managed, to further enhance the overall offering of accommodations at Chicago O’Hare International Airport (“ORD”, “O’Hare”, or the “Airport”) (together the “Hotels”).
Accordingly, CDA is issuing this Request for Proposals (“RFP”), to which hotel operators or teams (each a “Respondent”) can propose for consideration to become the selected hotel operator.
For more information, please refer to the Request for Proposals.
8
9
Chicago Economic Overview
10
Chicago Economic Overview
CHICAGO ECONOMIC OVERVIEW From its earliest days, Chicago has held an integral position as a center of transportation, commerce, and communication. In the era of globalization, Chicago maintains this strategic position, sitting at the nexus of virtually every major data network in the world. While the city has become a center of professional and service-sector employment, its industrial and manufacturing sectors are still vibrant, bolstered by the largest intermodal-container capacity in the Western Hemisphere.
Key trends include:
• The number of new hires in the Midwestincreased by 127,000 year-over-year from 1.16M inFebruary 2015 to 1.29M in February 2016.
• The Chicago (city) economy added an estimated15,077 jobs year-over-year, led by increases inthe leisure & hospitality and education & healthsectors.
• Venture capital investment into Chicagocompanies increased by 81.8%, moving up from$97.6M in Q1 2015 to $177.5M in Q1 2016.
• The number of major expansions in the Chicagoarea increased by 11.7%, from 624 expansionsin 2014 to 697 in 2015. This significant increaseinfluenced Chicago’s ranking as “Top Metro” inthe United States for corporate investment for thethird consecutive year by Site Selection Magazine
The city generates a gross regional product (GRP) of over $575 billion annually, and is home to 400+ corporate headquarters. Chicago’s largest industries include manufacturing, printing and publishing, finance and insurance, and food processing. Beyond the corporate juggernauts and the Fortune 500, Chicago’s diverse and innovative economic ecosystem is also home to digital startups, bio and clean technology companies, as well as a robust population of institutions of higher education and healthcare providers.
10.9% New Hires-MidwestYOY Growth, Feb 2016
Venture Capital InvestmentMSA YOY Growth, Q1-2016
11.2%Patents Issued-CityYOY Growth, Match 2016
11.7% Major Business ExpansionsMSA YOY 2015
81.8%
“...Chicago has led the nation in corporate relocations. The capacity and connectivity facilitated by O'Hare have undoubtedly played a significant role in companies deciding to put down roots here. From transportation and technology to talent and transparency, businesses move to cities that invest in their own future and the future of their residents.”
Rahm Emanuel, 2016
11
Company Product/Service Headquarters Revenue(Millions)
Employees (Chicago)
Advocate Health Care Teaching Hospital & Trauma Center Yes $4,600 22,000
JPMorgan Chase & Co. Commercial Banking No $102,100 11,497
University of Chicago Higher Ed Yes $3,130 11,400
Presence Health Healthcare No $1,240 10,987
Northwestern University Higher Ed Yes $1,860 10,846
Walgreens Retail Convenience & Drug Stores Yes $76,390 9,484
NorthShore University HealthSystem Healthcare Yes $849 9,464
AT&T Marketing, Consulting & Accounting Services No $132,450 9,367
Abbott Industrial & Agricultural Chemical Products Yes $20,250 7,977
Allstate Automotive, Life, Renters & Homeowners Insurance Yes $35,240 7,866
United Airlines Commercial Airline Yes $38,900 7,691
Northwestern Memorial Hospital Healthcare Yes $1,710 7,586
AbbVie Pharmaceutical Manufacturing No $19,960 6,826
Health Care Service Corporation Healthcare Yes $19,670 6,660
Sears Holdings Corp. Retail Department Store Yes $31,200 6,427
Bank of America Commercial Banking No $95,180 6,170
Loyola University Health System Healthcare Yes $4.00 6,000
UPS Package Delivery Service No $58,230 6,000
Motorola Mobility Holdings, Inc. Smartphone and Telecom Manufacturing and Design Yes $13,060 5,915
Rush University Medical Center Healthcare Yes $2.40 5,759
University Of Chicago Medical Center Healthcare No $763.80 5,250
Employco Employment Placement Agencies Yes $45.00 5,000
Ford Motor Co., Chicago Assembly Plt. Automobile Manufacturing No $144,080 4,992
Northern Illinois University Higher Ed Yes $588 4,985
Loyola University Of Chicago Higher Ed Yes $540 4,893
CHICAGO’S TOP 25 EMPLOYERS
12
Chicago Economic Overview
107%Occupancy
129%Average Daily Rate
NATIONAL HOTEL MARKET OVERVIEW
ON-AIRPORT HOTEL PREMIUM OVER REST OF AIRPORT SUBMARKET
• Hotels are substantial amenity to airports in terms of convenience to travelers and elevating profile and positioning of airport.
• Airport authorities across U.S. have reinvigorated their push to develop hotels on airport land now following 5-6 years of growth in airport and suburban markets.
• Half of nation’s busiest airports feature a hotel on airport property today or have one in planning phases. Prominent examples include ATL, MSP, JFK, SFO, and now ORD.
• 519-room Westin Denver International Airport is most recent high-profile opening.
• In order to evaluate how the convenience of on-airport hotels translates to occupancy and rate, JLL analyzed the performance of on-airport hotels located at various major U.S. airports. A survey of primary airport markets with on-airport hotels shows that their proximity to an airport’s core facilities is directly correlated to a performance premium relative to their off-airport competitors.
• On-airport hotels in close proximity to terminals achieve on average a 138% premium in revenue per available room over rest of competitive airport market.
138%Revenue per Available Room
O’HARE HOTEL MARKET OVERVIEW
• Full service hotels in Chicago’s O’Hare and Rosemont hotel submarkets have posted 12% annual growthin revenue per available room since 2010, nearly double the national growth rate. The new supplypipeline is low by historic standards.
• O’Hare and Rosemont submarkets have seen only limited supply growth in recent years.
• Prior to opening of 158-room Hampton Inn & Suites Rosemont Chicago O’Hare in late 2015 andopening of 200-room Hyatt Place Chicago O’Hare Airport in mid-2016, the market had not seen anynew hotel openings since 2009.
• O’Hare and Rosemont hotel submarkets have seen nearly $390 million in hotel transaction volumesince 2013, evidencing investor interest.
• Chicago’s O’Hare International Airport is the world’s busiest in terms of aircraft operations.
• The 860-room Hilton O’Hare enjoys strong gross operating profit per room given its strategic locationand terminal connection.
13
0
2,000
4,000
6,000
8,000
10,000
12,000
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Hote
l Roo
ms
O'Hare and Rosemont Submarket Hotel Room CountO’Hare and Rosemont Submarket Hotel Room Count
Ho
tel R
oo
ms
Source: STR Inc., JLL
O’HARE/ROSEMONT HOTEL SUBMARKET PERFORMANCE
14
O’HARE HOTEL MARKET OVERVIEW (CONT’D)
The Hilton Chicago O’Hare International Airport is the average daily rate and occupancy leader in the airport market given its physical connection to the airport terminal. The Hotel competes with a set of full service, upper upscale branded hotels in the airport submarket, as outlined below. In addition, when it comes to group and day meetings business, the Hotel also has a secondary competitive set which is comprised of other prime airport terminal hotels across the country, such as the Westin Denver International Airport, the Grand Hyatt Dallas Fort Worth International Airport and the Westin Detroit International Airport. The proposed 350-room hotel will compete with the same competitive set.
The competitive set hotels have benefited from compound annual growth in revenue per available room (RevPAR) of over 7% since 2009. The set’s occupancy rate of above 73% is several percentage points higher than the national average occupancy rate, indicative of the strong demand fundamentals for well-located upper upscale airport hotels.
$120
70%
90%
$140
2009 2010 2011 2012 2013 2014 20152015 2016
YTD JUN YTD JUN
80%
100%
$110
60%$100
50%$80
40%$60
30%$40
20%
$2010%
$0 0%
Chicago Economic Overview
MSAApprox. 825 hotels and 119,000 rooms
CBDApproximately 42,000 rooms
O’Hare54 hotels and 11,600 roomsADR RevPAR Occupancy
Source: STR Inc.
I 94
I 290US 12;US 45
I 190
IL 83
I 294
I 90
1.
2.
6.
7.
3.
4. 5.O’HARE
15
1.
5.
2.
6.
3.
7.
4.
O’HARE HOTEL MARKET COMPETITIVE SET
Hilton Chicago O’Hare Hyatt Regency Marriott Chicago
Marriott Chicago Suites Loews Chicago
Westin
Hilton Rosemont Chicago
Rooms: 860
Open Date: 1973
Meeting Space (sf) 42,300
Rooms: 256
Open Date: 1988
Meeting Space (sf) 2,500
Rooms: 1,096
Open Date: 1971
Meeting Space (sf) 100,000
Rooms: 556
Open Date: 2008
Meeting Space (sf) 53,000
Rooms: 470
Open Date: 1984
Meeting Space (sf) 49,000
Rooms: 300
Open Date: 1987
Meeting Space (sf) 22,000
Rooms: 525
Open Date: 1984
Meeting Space (sf) 49,000
16
17
Airport Information
18
Airport Information
FACTS AND FIGURES
Chicago O’Hare International Airport is one the world’s busiest airports. Located on over 7,200 acres within the City of Chicago, the Airport regularly serves a record number of passengers each year. In 2015, O’Hare was ranked #2 amongst all airports in the United States in total passenger volume (include both departing and arriving passengers), and ranked #2 in total aircraft movements (all aircraft landing and taking off).
Top 5 US Airports by Passenger Volume, 2015 (millions)*
ATL
101.5
78.9 74.764.1
56.8
ORD LAX DFW JFK
Top 5 US Airports by AircraftMovements, 2015 (thousands)*
ATL
882 875
681 656
541
ORD DFW LAX DEN
*Includes all enplaning (departing) and deplaning (arriving) passengers, and direct transit passengers counted once.†Includes all landing and taking-off of aircraft.Source: JLL; Airports Council International
This robust performance will continue to increase, serving both a growing Midwest region and a broader increase in air travel across the world. In 2015, O’Hare enplaned, or boarded, over 35 million passengers departing from the airport. Of these passengers, over 30 million traveled domestically, and roughly 5 million traveled internationally. Due to increasing global demand for air travel, as well as investments in airport infrastructure at O’Hare that will increase throughput capacity of aircraft and passengers, total enplanements will increase to over 50 million passengers by 2040, representing an average year-over-year growth rate of 1.8% beginning in 2016.
19
Total Enplanements, O’Hare, Forecast through 2040
Year
Tota
l Enp
lane
men
tsM
illio
ns
DOMESTIC ENPLANEMENTS
0
10
20
30
40
50
60
2015
2017
2019
2021
2023
2025
2027
2029
2031
2033
2035
2037
2039
2016
2018
2020
2022
2024
2026
2028
2030
2032
2034
2036
2038
204
0
INTERNATIONAL ENPLANEMENTS
Source: Federal Aviation Administration
20
Airport Information
CONCESSIONS
O’Hare’s robust retail offerings include familiar concessionaires, high profile, local and national restaurateurs, and a broad range of affordable and luxury goods to passengers. Our travelers expect the best from their experience at O’Hare, a philosophy CDA will carry through to the hospitality offerings described here.
O’Hare has one of the most robust concession programs in the United States. Amongst all major airports, O’Hare has the highest food and beverage sale per square foot, exceeding $2,700 in sales for every square foot of space of concession in the terminals. Similarly, O’Hare has the third-highest sales per square foot for specialty retail, news, and gifts, exceeding $2,000 in sales for every square foot of concession space in the terminals.
21
ABOUT THE DEPARTMENT OF AVIATION
The Chicago Department of Aviation (CDA) administers all aspects of two major airports – Chicago O’Hare and Midway International. The CDA is also charged with the management of the O’Hare Modernization Program (OMP), which will overhaul O’Hare’s intersecting runway system into a parallel runway configuration.
The CDA’s central purpose is to:
• Ensure safe and efficient travel through O’Hare and Midway International Airports;
• Successfully implement the O’Hare Modernization Program (OMP);
• Enhance economic activity and job creation of O’Hare and Midway International Airports;
• Manage airport tenant and concessions license agreements; ground transportation facilities; financial administration; research, planning and development activities; and
• Integrate airport-specific, sustainable planning and practices in design, construction, operations, maintenance and daily airport functions.
The CDA is self-supporting, using no local or state tax dollars for operations or capital improvements at O’Hare and Midway International Airports. Together Chicago’s airports generate more than $45 billion in annual economic activity and create 540,000 jobs for the region.