Revenue per available room jumped 34% to $167.03 during thefirst three months of the year at the InterContinental Chicago at505 N. Michigan Ave., compared to the first quarter of 2005, whenit was under different ownership. Average occupancy jumped nearly10 percentage points to 62.3%. Meanwhile, the company continues toseek city approval for a 70-story mixed-use building to replace thehotel's north tower, but indicates it is hardly a short-termproject.

"We think this makes sense, as the entitlements would be ineffect for several years, it will continue to add flexibility andvalue to the property," says executive vice president of assetmanagement Richard J. Moreau during his company's first-quarterconference call. "However, the economics are tougher to justifytoday as operating performance has accelerated and the value, basedon some recent comparable sales of this property, has risen. So wewould retain the entitlement, hold off on development of the towerfor now as we evaluate construction costs, prices for this uniquetype of product, as well as the overall performance of thehotel."

However, the company is bringing a concept that has provenextremely profitable at its Ritz-Carlton Half Moon Bay inCalifornia. Strategic Hotels & Resorts will begin building a2,000-sf wine room fronting on Michigan Avenue this summer, morethan three times the size of the model used at Half Moon Bay,Moreau says. Built for $250,000, the California wine cellar hasgenerated revenue of $1,000 per sf, Moreau reports, with a 45%profit margin. "Our first-year return will exceed the investment,"Moreau says during his company's earnings conference callThursday.