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Will Marriott go on block because convention business is lagging? (The Philadelphia Inquirer)

By Suzette Parmley, The Philadelphia InquirerMcClatchy-Tribune Regional News

June 04--The possibility that owners of the huge Philadelphia Marriott Downtown want to sell the facility is raising eyebrows.

The 1,408-room hotel is attached to the recently expanded but underperforming Pennsylvania Convention Center. Some industry observers say the Convention Center's slack bookings for the next few years likely will factor in a decision by hotel owner Host Hotels & Resorts of Bethesda, Md., on whether to put the building on the market.

The expanded center has so far failed to attract big-time convention groups and on Wednesday, the 15-member Pennsylvania Convention Center board is expected to vote on whether to hire a private company to manage it.

Host did not immediately return calls for comment. But the downtown Marriott's director of sales and marketing, Tim Haggerty, said on Tuesday, "Host is in the process of evaluating whether to put the hotel on the market or not. They are doing their due diligence."

Added Haggerty: "Over half of the hotel's revenue is generated through meetings and conventions. Certainly the success of the Convention Center, and the ability of the bureau to bring citywide conventions, is integral to the overall success of the hotel in the long run."

The Marriott opened in January 1995. While Host has been its third owner since then, Marriott International has managed it the whole time, and "will continue to be moving forward regardless of the potential sale," Haggerty said.

While convention bookings are its main revenue source, he said the hotel staff has been very successful in going after business that is not related to the Convention Center.

Haggerty said the hotel will run an all-time high occupancy this year with a combination of group customers that are here for conventions, as well as corporate travelers and leisure travelers.

"As an anchor hotel for the Pennsylvania Convention Center, the Marriott Downtown is obviously important in meeting the demands of conventions and groups," said Jack Ferguson, president and CEO of the Philadelphia Convention and Visitors Bureau. "But regardless of this sale, it is business as usual for the PCVB with the Marriott Philadelphia and the Pennsylvania Convention Center."

C. Patrick Scholes, a lodging analyst with SunTrust Robinson Humphrey Inc., said in an e-mail: "Host typically sells assets for several reasons. These reasons typically include concerns over the long-term demand growth of the market, potential for new supply (competition), which would subsequently hurt revenues, and if the property is in need of renovation."

The newsletter Real Estate Alert of Hoboken, N.J. said in a recent report that Host hopes to fetch as much as $325 million, or $231,000 per room, more than triple the total price paid in any previous Philadelphia hotel resale.

The company owns upscale hotels, mostly in the U.S., which are managed by Marriott, Sheraton, Ritz-Carlton, Hyatt and other companies. In the city, it also owns the Philadelphia Airport Marriott.

Host has sold other brands, including Sheraton hotels, in recent years.

The 23-story downtown Marriott opened with around 1,200 rooms on January 27, 1995, some 20 months after the original Pennsylvania Convention Center opened in summer 1993.

In anticipation of the Republican National Convention in 2000, it expanded to 1,408 rooms in 1999 by converting part of the Reading Railroad Head House into additional guest rooms. It has undergone several major renovations over the years. It was last renovated for $54 million in 2011.

"As a group-oriented hotel, the Marriott's location is excellent, particularly as it is physically attached to the convention center, which meeting planners and attendees find a huge plus in a northeastern city like Philadelphia," said Peter Tyson, vice president of PKF Consulting USA.

On Jan. 11 2013, Host -- which is a REIT, or real estate investment trust, sold the 1,663-room Marriott Marquis, metro Atlanta's largest hotel, for $293 million and used the proceeds to pay down debt, make additional acquisitions, put toward general company funds, and pay off dividends, according to a company news release.

"I tell my staff with that sale it did not cause a change in management or a disruption in service to what the guests receive," Haggerty said. "It would be similar to a sale here of the Marriott."

Contact Suzette Parmley at 215-854-2855, [email protected], or on Twitter @SuzParmley.


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