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Center City, Philadelphia Hotels Lagging Occupancy and ADR
Rates Make for Sleepless Nights for Hoteliers

By Suzette Parmley, The Philadelphia InquirerMcClatchy-Tribune Regional News

Oct. 28, 2011--The price of a hotel room in Center City significantly lags other competitive East Coast cities, such as New York, Washington, and Boston.

Though the consumer is the beneficiary, the price differential has made for some sleepless nights among local hoteliers, who say the current average daily rate (ADR) is barely enough to cover the costs of keeping the lights on and cleaning the sheets.

The recent controversy over the number of new rooms needed to support the expanded Convention Center brought their predicament to the forefront. Though room rates are slowly edging up, hoteliers contend they are nowhere near pre-recession 2007 and 2008 levels.

In those years, the ADR was $166.79 and $171.70, respectively. This year, it's $154.82.

"It is important that we do not overbuild and saturate the market with too many hotel rooms, which would affect the financial stability of current hotels," said James Gratton, president of the Greater Philadelphia Hotel Association and general manager of the Courtyard by Marriott Philadelphia Downtown.

In 2000, when Philadelphia hosted the Republican National Convention, the city did just that, hospitality-industry experts say, adding 4,000 hotel rooms. Supply quickly outpaced demand.

This year, the supply issue was revisited in anticipation of the Convention Center's $786 million expansion. The bigger venue is the 14th largest convention center in the nation and for the first time allows the city to host two major events simultaneously.

For the Philadelphia Convention and Visitors Bureau, the agency charged with booking space at the Convention Center, the more new hotels at its doorstep, the better.

"Both meeting planners and show organizers want . . . their attendees to walk to and from the Convention Center, thus reducing transportation costs or having to bus them," said Jack Ferguson, the bureau's president and CEO.

Ferguson championed the need for at least 2,000 more rooms -- boosting the city's total to 12,500 from 10,700 -- to support the 62 percent-bigger Convention Center,

"With that inventory, we would be able to handle all demand segments . . . and still have our hotels running occupancies greater than 70 percent," he said on the eve of the expansion's March debut.

Six months later, at Hotel Monaco's Sept. 15 groundbreaking at Independence Mall, Mayor Nutter and Ferguson reiterated the need for 2,000 more rooms. But the Hotel Association, which represents 87 hotels, including all 44 in Center City, was far less exuberant, saying 2,000 was far too many -- and exposing the growing rift.

To avoid a public showdown, Nutter and Ferguson revised the figure to 1,000 rooms at the Sept. 26 announcement of another new hotel. Fittingly, the duo appeared side-by-side in the expanded portion of the Convention Center and said recent additions to the city's hotel roster -- the latest a planned a 246-room Hilton Home2 Suites -- will add just over 1,000 rooms combined, requiring only 1,000 more.

The Hotel Association breathed a sigh of relief.

In selling the city, a united front is key. Ferguson's agency works closely with hoteliers to secure large blocks of rooms to meet the demands of conventions and groups -- a segment that accounted for 35 percent of rooms in the city last year, outpacing all other demand. Convention-related hotel-room nights booked by the bureau for future years totaled 745,909, up 79,000 from last fiscal year, its annual report says.

And on the need for a new anchor hotel, with 500 to 800 rooms, the bureau and the Hotel Association are on the same page. Ideally, it would be near the Convention Center's Broad Street entrance and would serve as headquarters for a second group, complementing the 758-room Sheraton City Center Hotel.

But even with a new anchor, Gratton said, the hotels need to maintain an overall occupancy level near 75 percent to prosper. "This will allow existing hotels to remain profitable," he said. "Hotels are not anticipated to recover from the recession until 2013, and we have to . . . find business when there is not a citywide convention in town."

In addition, he said, "the present average daily room rate . . . and the high operating costs in Philadelphia do not make a strong climate for hotel development."

The rate does, however, make for happy customers like Deborah Drake, 53, an airline worker from St. Louis. She checked into the 350-room Hyatt Regency Philadelphia at Penn's Landing on a recent Friday and paid $189 per night for two nights, down from $239. She got a discounted group weekend rate because she was in town for a niece's wedding.

"So far, so good," Drake said as she headed toward her room. "I'm looking forward to seeing the city."

Contact staff writer Suzette Parmley at 215-854-2594 or


(c)2011 The Philadelphia Inquirer

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