|The Hotel Monaco Philadelphia is scheduled to open in October.
PHILADELPHIA—Often referred to as “the birthplace of freedom” in the United States, Philadelphia is known as a prominent backdrop in the country’s fight for independence. Now the market’s hotel industry is undergoing a minor revolution of its own, according to some of the city’s hoteliers.
An uptick in demand (+2.2%) and overall performance is driving an influx of development. Philadelphia has 47 projects in the pipeline, according to STR, parent company of HotelNewsNow.com. With 10 hotels having broken ground or in the process of finalizing bids on the general contract, the market trails only New York (58), Washington, D.C. (16) and Orlando, Florida (11), with projects in the “in construction” phase of the pipeline.
The market has 368 projects in its existing supply as of 31 July, according to STR.
The new dynamics that will emerge from the uptick in construction are “game changing,” said Nick Gregory, GM of the Hotel Monaco Philadelphia, which is slated to open in October. The property will be Kimpton Hotels & Restaurants Group’s second in the city behind the Hotel Palomar Philadelphia and the company’s 10th to open under the Monaco brand.
Although the 268-room property will be housed in an 11-story Greek revival building, the Hotel Monaco Philadelphia will feature a graduated building design from its predecessors, Gregory said. It “is going to have more of a contemporary feel to it” than Hotel Monaco properties in other cities, he said.
The time was right to establish that timelier take in Philadelphia, Gregory said. “Being located between New York and Washington, D.C. … there is a logical presence that’s needed for us here, so we can feed off the business from our sister properties in our sister cities.”
Philadelphia-based owner-operator Wurzak Hotel Group also saw an opportunity to expand its present in the market. The company is constructing the city’s first Home2 Suites by Hilton with an opening scheduled for the summer of 2013. And according to a news release, the 246-room property will be the largest Home2 Suites property to date.
Supply absorption not a problem
Philadelphia-based Hersha Hospitality Management recently added to its portfolio an extended-stay property in the University City area of Philadelphia, home to the University of Pennsylvania and Drexel University.
The 136-room Homewood Suites by Hilton University City, which opened in May, “(has) actually been a very smart addition to the supply, and it’s been easy to absorb,” said Mike Murray, COO of the management company.
That’s been the case for most new hotels in the city, the sources interviewed for this report said.
Philadelphia doubled the size of its convention center last year, Gregory said. “There’s a demand generator … (but) there’s always got to be a balance, you don’t want to overbuild.”
Of the city’s existing 43,997 rooms as of 31 July, 679 had opened within the previous 12 months, according to data from STR.
Gregory is confident the Hotel Monaco Philadelphia, which is geared more toward the leisure traveler, will perform well in terms of occupancy once it opens. “The market does around 75% (occupancy). We’ll probably come in a little under it,” he said.
He also expects the property will draw in a lot of business from couples looking to get married in Philadelphia. “I expect we’ll do upwards of 50 to 60 weddings a year.”
The market reported occupancy of 77.8% during June, as well as a 6.7% increase in average daily rate to $127.94 and a 9.6% increase in revenue per available room to $99.58, according to STR.
There’s a significant amount of room for growth from a leisure perspective, Hersha’s Murray said.
“It never hurts that we get this intrinsic PR about the city that we couldn’t plan … The Phillies have been to the World Series twice (in recent years), the arts community has made lots of additions over the last year… Those are just additives to all the other internal dynamics that are going on here. It’s a perfect storm,” he said.
With new players entering the market and looking to stand out once they do, older properties are reinventing themselves as well to maintain their share of business.
The Crowne Plaza Philadelphia West, for example, is investing in major renovations based on some of the feedback management has gotten from the hotel’s guests.
One of the bigger changes is the conversion of one of the property’s floors into a women’s-only wing, a trend that is slowly gaining traction around the world within the past year.
The exclusive floor will be a key-access area serviced only by female employees. It also will feature upgraded amenities such as slippers, higher-powered hair dryers and curling irons.
“We have a high percentage of women business travelers … and they’d seen this in other hotels,” said Ron Balle, sales director of the Crowne Plaza Philadelphia West. The property’s female guests suggested they would be interested in seeing the same luxury in Philadelphia.
Additionally, the hotel is upgrading its Internet speed, replacing all exercise equipment in its gym and redoing the lobby.
Balle said it will cost anywhere from $400,000 to $500,000 for all the renovations.
Other properties renovating in the market include the Clarion Hotel Philadelphia Airport, the Sheraton Society Hill and the Philadelphia Marriott Downtown.
“It’s a great time to make the investment while we have the customers,” Balle said.