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Business is Bad - Real Bad - With 10,700 Rooms to Fill and
Little Convention Activity Philadelphia Hotels Wage Price War

By Suzette Parmley, The Philadelphia InquirerMcClatchy-Tribune Regional News

Jan. 17, 2010--BUSINESS IS BAD -- real bad -- at Philadelphia's hotels these days, and a price war is raging.

With 10,700 rooms to fill and little large-convention activity, Center City hoteliers are slashing rates and praying to get through a tough first quarter, which many say could be the worst in years.

"There are not enough guests to go around for all of us," said Julie Coker, general manager of the 350-room Hyatt Regency Philadelphia at Penn's Landing. "In this age, you are competing against everybody from the Holiday Inn to the Ritz-Carlton."

To fill rooms, the scissors have come out everywhere, upscale hotels and economy inns alike. The result: a bargain-hunter's dream.

For $39 to $89 weeknights, $109 to $189 weekends, if you book through Priceline.com, you can get a room at the Philadelphia Marriott on Market Street.

A room at the Best Western Center City Hotel, in the heart of the museum district, was $99 midweek and $109 for this weekend -- about $10 less for each than a year ago.

At the Hyatt Regency, rooms are $190 midweek, down from $200-plus last January. On weekends, the rate is $119, down from $159.

Kelly Busse, 50, of Midland, Mich., a senior finance manager for Dow Chemical, checked in Friday afternoon at the Doubletree Hotel on the Avenue of the Arts, where she was meeting her husband for a weekend of sightseeing.

After investigating rates at two other hotels, Busse settled on the Doubletree, where she is staying through today for $152 a night.

"It's a good time to travel," she said with a big smile as a bellman picked up her bags.

Competition among hotels has intensified because there are fewer major conventions -- those requiring at least 2,000 rooms and using at least two hotels -- in the first three months of 2010 than in previous years, a result of the delayed opening of the expanded Convention Center, from late 2009 to March 2011.

"We're going into all our distribution lists and trying very aggressive marketing efforts," said Bill Walsh, general manager of the Philadelphia Marriott, which is connected to the Convention Center and relies heavily on large conventions to fill its 1,408 rooms.

Double-digit declines "Our mantra is not to turn anyone away because of rate," Walsh said, noting that hotels have waged this price war for several months.

November figures from Smith Travel Research showed Center City hotel occupancy at 72 percent, down 4.7 percent from a year earlier; the average room rate down 16.7 percent, to $153.90; and revenue per available room down 20.6 percent, to $110.77. Numbers for December will not be available until later this month.

The five-county Philadelphia metro area did not fare much better in November, also showing double-digit declines in average room rate (down 14.6 percent) and revenue per available room (down 16.1 percent).

With what is typically the toughest quarter of the year under way, hoteliers are bracing for the worst.

"Every dollar in room rate that you give up really affects your profit more than a point in the occupancy does," said Peter Tyson of PKF Consulting Corp., which works with the hospitality industry nationwide.

The dearth of major first-quarter conventions is compounding the problem for the city's hotels. Only two 2,000-plus-room events have been booked: the National Soccer Coaches Association of America convention (7,298 rooms), which ended yesterday, and March's National Science Teachers Association conference (23,771 rooms).

Slim pickings? When it opens, the expanded Convention Center will help solve some of the problems typical of the start of every year, said Jack Ferguson, executive vice president of the Philadelphia Convention and Visitors Bureau, which books the center.

January tends to be dominated by events such as the Philadelphia Home Show, which opened yesterday and runs through next Sunday, Ferguson said.

"These shows all require a long move-in and move-out period, curtailing other convention groups from coming in," he said. The expansion will fix that by allowing both so-called gate shows and large conventions to occur simultaneously.

Until then, it could be slim pickings.

In a bid to fill more hotel rooms, the Greater Philadelphia Tourism Marketing Corp. last week launched a revamped and renamed Web site, Visitphilly.com, and a $1.7 million winter marketing campaign with new TV, online, and print ads.

When hotels charge less, the tourism-marketing group and the Convention and Visitors Bureau -- each of which gets a portion of its budget from the 8.2 percent city hotel tax -- have less to spend touting the city's charms.

"We've had to eliminate advertising in Canada and to target closer-in areas and rely more heavily on partnerships," said Meryl Levitz, the tourism agency's president and chief executive officer, because last year about $1 million less was received from the hotel tax.

The Convention and Visitors Bureau got about $1.25 million less. "It's national. It's a buyer's market," said the bureau's Ferguson. "It's all about depressed occupancies."

Patrick Scholes, senior lodging analyst at FBR Capital Markets in Arlington, Va., said that in down times, "the road to recovery for the lodging industry, historically, is to get heads in beds. But to do that, you put everything on sale.

"That is a very important part of the recovery . . . that [hotel guests] take the deal, and from there, you slowly increase your pricing and build from that."

In Philadelphia, lower room rates will likely continue throughout 2010.

"Our forecast doesn't indicate anything happening in the pipeline that will make any substantial change to that forecast," said Walsh at the Philadelphia Marriott. "We will pick up no new demand in the city."

At the Hyatt Regency Philadelphia at Penn's Landing, where the average daily room rate is down 12 percent from a year ago and revenue per available room is off about 25 percent, general manager Coker is just as anxious.

Although she has not had to lay off any of the hotel's 250 employees, it's a possibility.

"If you can get out of the first quarter either flat or ahead of budget, it sets the tone for the balance of your year," she said. "Unfortunately, we're looking to come out behind budget in the first quarter."

But if you're a traveler, it's easy to think you've hit the jackpot.

Nashville psychologist Michael Myszka, 58, and son Jonah Powers-Myszka, 18, were paying $120 for each of two nights, a special group rate, at the Doubletree, where they arrived Friday for the soccer coaches convention, where Jonah was being honored.

"For a big city, the rates are very good," Michael Myszka said. "We are very pleased."

Contact staff writer Suzette Parmley at 215-854-2594 or sparmley@phillynews.com.

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To see more of The Philadelphia Inquirer, or to subscribe to the newspaper, go to http://www.philly.com/inquirer.

Copyright (c) 2010, The Philadelphia Inquirer

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