Big Three’s Rebound, New Developments Drive Detroit’s Lodging Market


Detroit’s efforts to diversify and modernize its economic base, even as the city struggles through bankruptcy, are benefiting hotels in downtown Detroit and its suburbs. Greater Detroit has become competitive in emerging technologies such as biotechnology, nanotechnology, information technology, and hydrogen fuel cell development. However, Detroit’s economy still largely depends upon the strength of the automotive industry, primarily the “Big Three”— General Motors, Ford Motor Company, and The Chrysler Group.

Population Trends: The resident population of the Detroit MSA stands at around 4.3 million. Between the 2000 and 2010 censuses, Detroit’s population dropped 25%, a significantly higher decrease than the Detroit MSA, which lost 3.5% of its population, or the state of Michigan, which dropped 0.6%. From 2013 to 2018, Detroit’s population is projected to decrease at a lower rate than recorded previously, with a forecasted net loss of approximately 30,000 residents.

Unemployment Rates: The Detroit MSA suffered its highest unemployment rates in 2009 (15.0%), compared to the national average of 9.3%. Since then, the Detroit MSA’s unemployment rate has steadily decreased to levels closer to the national average, dropping to 9.4% in 2013 compared to 7.4% for the United States as a whole.

Investments: According to the American Automotive Council—which represents the public policy interests of Chrysler, Ford and General Motors—automakers and suppliers are America’s largest manufacturing sector, its largest exporter and a top consumer of American steel, iron, rubber and semiconductors. In 2013, they invested $2.65 billion and created 9,700 jobs in the state. A 2014 report shows the Big Three have invested $38 billion in new capital for U.S. plants and facilities over the past five years, and $18 billion in U.S. R & D this past year alone. GM has invested more than $2.8 billion in its Michigan facilities since 2009. It plans to invest $449 million in its Detroit-area auto plants, which will add an undetermined number of jobs.  This brings GM’s total investment at its Detroit-Hamtramck plant to more than $1 billion over the past five years. Ford invested $550 million in its Flatrock plant, and Chrysler announced in 2013 that it would invest $52 million in its engine plants in Trenton and Dundee, creating nearly 300 jobs.

These investments signal the resurgence of Detroit’s auto industry and are expected to support long-term economic growth in the area. Apart from the automotive industry, the regional economy benefits from the presence of major financial employers including Quicken Loans, Fifth Third Bank, Deloitte Consulting, Ernst & Young, and PricewaterhouseCoopers. It also benefits from a strong presence of technology companies including IBM, Electronic Data Systems (EDS), and Google. The healthcare industry is also economically significant with renowned health centers such as the Detroit Medical Center (DMC) and the Henry Ford Health System.

New Developments: The primary convention facilities in Detroit are clustered within the Detroit Civic Center, which consists of the Cobo Conference/Exhibition Center, Cobo Arena, Joe Louis Arena, Hart Plaza, and Veterans Memorial Building. A long-term, multi-phase, $279 million renovation of Cobo Center is under way and scheduled to be completed by January 2015. A new $650 million entertainment district, spearheaded by Olympia Development owners, Mike and Marian Ilitch, is planned for a 45-block area between Midtown and downtown. The developers project the development will create 8,300 jobs and have a $1.8 billion impact on the city. The project will include a new 18,000 seat arena that will be the new home of the National Hockey League’s Detroit Red Wings. The arena is expected to open in time for the 2016 season. It will generate between 100 and 150 event nights per year, up from 70 at the current Joe Louis Arena. The existing facility will be demolished in 2016 after the Red Wings relocate.

The 400-room Greektown Casino Hotel, one of three resort hotels in Detroit, is planning a $25 million to $50 million renovation to its casino. The renovations and upgrades will include new slot machines, carpets, and HVAC work. The complex lost nearly $31 million in 2013 and predicts another loss in 2014, but hopes to turn a profit in the second half of 2015 after the renovation is complete.

Occupancy and ADR Performance: The Detroit MSA has achieved steady improvements in occupancy since 2010 after hitting a low of 47.5% in 2009. In 2013, occupancy increased to 62.4%, a figure not reached since the last recession. Year-to-date occupancy figures for 2014 (January-May) are up 1.3% from the same period for 2013. Average Daily Rate in the market is improving as well. It was up 3.8% in 2012, 5.8% in 2013, 5.3% year to date, which demonstrates growth above the national average. As a result of improving occupancy and ADR, RevPAR for the Detroit MSA market was up 7.6% in 2011, 7.0% in 2012 and 7.0% in 2013. It was up 6.7% year to date compared to 2013.

Hotel Landscape: The auto industry contributes greatly to the corporate segment demand generated at Detroit’s hotels. Improvement in the automotive sector, and its increased demand for manufacturing, labor training, research and development, is creating increased demand for hotel rooms. The gaming industry contributes to the growth of the leisure segment. Three casino resorts in Detroit represent a total of 1,200 rooms and attract a number of tourists. Detroit is one of the largest American cities and metropolitan regions to offer casino resort hotels. According to the Detroit Metro Convention & Visitors Bureau, the area receives 19.8 million visitors each year, who spend an estimated $4.8 billion. The following table shows the largest hotels in downtown Detroit, Dearborn, and Romulus (home of the Detroit Metropolitan Wayne County Airport), by number of rooms.

Hotels under construction or under development: Twenty-three hotels comprising 2,160 rooms are under development in the Detroit MSA, including five hotels comprising 469 rooms under construction. We have focused our analysis on new lodging developments in the city of Detroit as detailed below.

  • The renovation and restoration of the 19-story David Whitney building, which was originally built in 1914, is under way. The $82 million renovation includes banquet and meeting space on the second floor, a 136-room Aloft hotel on the third through ninth floor, and 105 residential apartments on the upper floors. It is slated to open by fall 2014. The project is receiving $8.5 million in state grants, coming in the form of a $7.5 million performance-based loan and a $1 million Community Revitalization Program performance-based grant.


  • The formerDetroit Fire Department headquarters recently sold for $1.25 million. Its developers plan to restore the 64,900 square foot building, built in 1929, into a 100-room boutique hotel at a cost of approximately $25 million.


  • A mixed-use project at South University Village, on Canfield Street, will include a 120-room hotel, 248 market-rate apartments, 19,000 square feet of ground-floor retail space and a conference center with capacity for up to 300 attendees. This project is still in its planning stages, and preliminary costs are estimated at $60 million.

Hotels recently renovated: Notable renovations and restorations in Detroit over the past several years include the impressive, $180 million restoration of the 29-story Book Cadillac building into a 453-room Westin. The restoration preserved a number of classical elements of the original architecture and was completed in 2008. That same year, a $90 million restoration of the historic Pick Fort Shelby hotel was completed, and a new 203-room Doubletree Guest Suites Fort Shelby/Detroit opened. A comprehensive renovation of the largest hotel in Detroit, the 1,298-room Marriott Detroit at The Renaissance Center, is ongoing. The $30 million renovation encompasses all guest rooms and public spaces. The following table shows the hotel renovations that have occurred in Detroit since 2008.


With unemployment rates steadily decreasing in the Detroit MSA, and the automotive industry increasingly investing in the market, Detroit’s long-term outlook seems brighter today than it was a few years ago. Detroit is also becoming competitive in alternative industries such as the healthcare and technology sectors, thereby increasing the generation of commercial and leisure room nights in the market. Moreover, the soon-to-be fully renovated Cobo Center should position Detroit to attract more group demand. This, coupled with sustained improvements in various industries in Detroit, creates a positive outlook for Detroit’s lodging industry.