Arrowhead Hotel a No-Go in Tough Economy

The Wheaton Park District will hold off on plans to build a hotel at Arrowhead Golf Club.

A consultant's report concluded that in an already-saturated market during a poor economy, a hotel investor's return would not be ideal.

In July 2011, the park district partnered with developer Fairway Suites, allowing the firm to represent the district in marketing the Arrowhead property to hotel chains such as Hilton or Hyatt.

In a Nov. 12 letter to park district staff, Fairway President Joe Ross wrote that while now is not the right time, the hotel industry should pick up in 2013 to 2016.

"While the economy is the major reason for caution in the hotel development business, the forecast from all the major sources who track the hotel industry advise that 2013 thru 2016 should show significant industry growth due to less than half of one percent growth in the past four years."

Normally, hotel development is five percent to six percent annually, Ross wrote. "At some point the pent-up demand will spur new development."

He said he hopes to "steadily and cautiously stay the course" because of the great facility at Arrowhead. 

Park commissioner and former board president Ray Morrill said he thinks the hotel is an opportunity that should be looked at again in the right economy.

Consultant Chuck Pinkowski wrote in the report a hotel at Arrowhead would succeed in weekend business at 85 percent occupancy during the busy golf, wedding and event season April through September. During the same months, however, weekday business would lag at 65 percent occupancy. Further, the hotel would be at 65 percent occupancy everyday during the offseason, according to the report.

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Though projected returns for an investor are discouraging, Arrowhead Restaurant and Bar could make more than $830,000 in additional revenue from hotel guests, even at 65 percent occupancy. 

Based on Pinkowski's estimates, if hotel guests eat 25 percent of of their meals at Arrowhead, the park district would make more than $400,000. If they walk over to Arrowhead for 75 percent of their meals, the park district could make more than $830,000, according to a staff report. 

Staff wrote in a report to board members, "a future board may wish to review this concept opportunity should a franchisor, lender and developer approach them together with a firm offer that includes a failure backstop for the district."

Benard said to move forward with the hotel concept, a franchisor, developer and lender all need to come to the park district with a plan that includes the failure backstop. 

Related:

• Study: Arrowhead Hotel Would be 'Questionable' Venture
• Should the Park District Bring a Hotel to Arrowhead Golf Club?
• Park District Exploring Idea for Hotel at Arrowhead
• Park District Commits to Bring Hotel to Arrowhead