March 2, 2014 – The owner of 46 hotels nationwide says high supply has made Chicago its “weakest market.”

LaSalle Hotel Properties, owner of two hotels in River North, Hotel Chicago and Westin Michigan Avenue, says revenue was down 13 percent overall at both hotels in the last three months of 2013. Average daily rate fell 8.1 percent and revenue per available room was off 7.4 percent.

Michael Barnello, LaSalle’s chief executive officer and president, was not optimistic about Chicago during a conference call with stock analysts on February 20.

“We’re not expecting a big performance in Chicago in 2014,” said Barnello.

Of the 14 markets LaSalle is in, Chicago already has the most hotel rooms and it’s only getting better for hotel guests but worse for hotel owners. LaSalle is expecting a four percent increase in supply of hotels in 2014, what Barnello calls “higher than average and higher than we’d like.”

“When you think about it structurally, in terms of whether we continue to invest there,” warns Barnello (right), “our perspective is we just have to factor those things into any acquisition model we look at because there’s prices for lots of different assets and we want to make sure that we’re underwriting both the supply and demand trends accurately.“

LaSalle is hoping Hotel Chicago will help. The former Hotel Sax is now managed by HEI Hotels & Resorts, which officially changed the name of the Marina City hotel on February 3. It will be branded as a Marriott

“We’re expecting continued growth to be part of the Marriott reservation system and we’re hopeful to update you positively on that, fast-forward a year from now,“ Barnello told an analyst who asked about Chicago.

LaSalle’s strongest markets in the fourth quarter of 2013 were Boston and San Francisco, where revenue per available room grew more than 14 percent in both cities.

Photo: A new sign for Hotel Chicago installed on the State Street side of the 353-room hotel on February 15.

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