Earlier this year, all the (sporting) eyes were on Detroit as the city hosted its first National Football League draft in late April. The draft had an attendance of more than 775,000 people, breaking the overall record set previously in 2019. The NFL draft was obviously a huge boon for the Detroit hotel market. According to Visit Detroit (the convention and visitors bureau), the week of the draft may have generated the most hotel revenue in one week in the history of the region.
“More importantly, the success of this event has created awareness of Detroit as a viable group and tourist destination,” said Eran Singer, vice president for CBRE Valuation and Advisory Services. “The hope is that Detroit will become more competitive in the future for hosting similar large events.”
Claude Molinari, president and CEO of Visit Detroit, agrees. “There has been a steady growth in the number of hotels in Detroit leading up to the draft, but the record-setting performance demonstrates the need for even more growth to meet future demand,” he said. “2023 was the best year in the history of hotels in southeast Michigan, with more than $1.1 billion in revenue just from lodging.”
During the draft, occupancy ranged from 74 percent to 92 percent. Detroit has 5,313 hotel rooms as of April—a 25 percent increase since the end of 2019, according to the Downtown Detroit Partnership. Per the DDP, the average daily rate downtown is $251.
Jan Freitag, national director, hospitality market analytics at CoStar Group, said room rates were up 9.5 percent in the Detroit market in April. Detroit growing in the first few months of the year speaks to the interest that developers have in the market, he added.
What drives the best investor interest? Freitag said it often is the resurgence in the downtown office market. “People want to be downtown when that happens,” he continued. “This flight to the suburbs is reversing and Dan Gilbert [founder of Bedrock Detroit] is putting a lot of money in downtown Detroit.”
Growth Drivers
Detroit has historically been driven by the automotive industry, with multiple major companies headquartered in the region, as well as several large auto parts suppliers and vendors. Specific to the Downtown Detroit area, the Michigan Central mobility innovation district in the Corktown neighborhood is nearly complete and is expected to create up to 5,000 jobs by the end of 2028, Singer said.
Two other notable projects are expected to drive area growth in the near future. The University of Michigan Center for Innovation, a research, education, and entrepreneurship center that will focus on technology and innovation, is currently under construction in downtown Detroit. In the New Center area just north of downtown Detroit, Henry Ford Hospital plans to complete a $2.5 billion, 1 million-square-foot expansion that will also include a joint medical research center with Michigan State University.
The market has had a combination of factors that have built it’s potential for development for a number of years, said David Di Rita, principal of The Roxbury Group, which owns the Metropolitan Building (housing the Element Detroit), the David Whitney Building (housing The Hotel David Whitney, Autograph Collection), the Plaza (Apartments By Marriott Bonvoy extended-stay property is located there) and the future AC Bonstelle in midtown Detroit.
“First, the Detroit market has been chronically under-keyed for decades, in large measure due to the lack of any meaningful hospitality investment prior to the late 2000’s,” he said. “Second, even as new product has come online starting about a decade ago, this was against the backdrop of increasing demand drivers including substantial increases in business travelers to the market in the pre-COVID period, as well as substantial growth in leisure demand driven by ongoing growth in dining, sports and entertainment activities in the downtown.”
Di Rita believes Detroit’s strongest drivers are around the leisure traveler. “With the addition of Little Caesars Arena to the entertainment district in 2017, Detroit now [has] the only downtown in North America with four major league sports teams playing within walking distance of one another,” he continued. “Together with Comerica Park and Ford Field, these three facilities also ensure that all major concerts and performances for a sprawling metropolitan region of over 4 million people occur downtown. This is in addition to a theatre district that is second only to New York in terms of seats.”
The Big Bets
Gilbert’s Bedrock is spurring hotel development in the city as well office space. The real estate firm was the developer, along with the watchmaker Shinola, on the first Shinola hotel located in Woodward Ave. in Detroit in 2018. Bedrock executives said the city needed “a world-class hotel” that befitted the city, and that adaptive-reuse hotel spurred hotel development in downtown.
In 2023, the city saw three new hotels open—the Roost Hotel at Book Tower, the Godfrey Hotel in Corktown and the Cambria Hotel Detroit. Construction is underway on more hotels.
Bedrock Detroit announced earlier this year that the luxury hotel brand, Edition, will open one of its largest hotels and residence developments in the world at Hudson’s Detroit, the city’s second tallest building.
One of the first two hotels in Project HQ Hotels & Residences, the “smart lifestyle” hospitality brand from sbe through an alliance with Wyndham Hotels & Resorts, will be in Detroit. The Park Avenue House in Detroit is set to be converted as the first U.S.-based property for the brand. The entire property, including 174 guestrooms, will be renovated as part of the project. The hotel will have a restaurant from sbe's Disruptive Restaurant Group, a cafe and quick-service-delivery from the Everybody Eats platform.
Detroit-based developer Sterling Group and the Detroit Regional Convention Facility Authority announced that the hotel that has been under construction in Detroit at the site of the former Joe Louis Arena will open under the JW Marriott brand.
Hotel construction is expected to be completed by early 2027, in time for the Men’s NCAA Final Four tournament in March 2027. The 600-room hotel will significantly increase Detroit’s hotel room availability, significantly boosting the city and state’s appeal for large conventions and other major events, according the DRCFA.
“This project will be a game changer for the Detroit market, as the city has long lacked a convention headquarters hotel that connects to the convention center,” CBRE’s Singer said. “The city would become more attractive and competitive to large event planners with such a headquarters hotel.”
This article was originally published in the July/August edition of Hotel Management magazine. Subscribe here.