Philadelphia Hotel Openings, Renovations Continue
When the 270-suite Residence Inn by Marriott opens this month in downtown Philadelphia, it will be a throwback to 1999 and 2000: During a roughly 18-month period, new full-service hotels opened in quick succession in anticipation of the Republican National Convention, which was held there in the summer of 2000.
The development pipeline for hotels has slowed considerably, but the upscale properties that opened downtown then, which included a 306-room Sofitel, a 331-room Ritz-Carlton and a 583-room Loews, built a customer base among corporate buyers and positioned their brands for what suddenly became a highly competitive market. While not an upscale brand, Courtyard by Marriott also opened a 498-room property in a prominent downtown location in 1999.
The spate of openings, meanwhile, caused established deluxe hotels, such as the 364-room Four Seasons, to undertake extensive refurbishment plans in an effort to retain their market leadership.
For their transient hotel programs, it often had been easy for buyers to overlook Philadelphia as a distinct destination, instead focusing their attention in the crowded Northeast corridor on Washington, D.C., and New York, two high-visibility destinations. The abundance of new upscale rooms coming online in 1999 and 2000, however, made this harder. Not only do many travelers have business in center city Philadelphia, but downtown also provides convenient access to suburban New Jersey, where numerous pharmaceutical companies are based. As the economy slumped in mid-2001 and the effects of Sept. 11 on business travel became clear, it also became apparent to cost-conscious buyers that Philadelphia was surprisingly cost-effective for their transient hotel needs.
Accordingly, the performance of Philadelphia's lodging industry has fared fairly well in recent months. In April, for example, the city's occupancy rate was up 9.7 percent over the comparable month in 2001, while revenue per available room, a key indicator of profitability, spiked 13.2 percent. Of the 25 top U.S. markets tracked by Smith Travel Research, only eight showed positive occupancy and RevPAR gains for the month and Philadelphia's increases were the greatest in both criteria.
"After a banner April, May should also be a strong month, with decent corporate transient demand as well as decent group business," according to Keith Mills, lodging industry analyst for UBS Warburg.
The negotiating environment for buyers should be positive. "The previous mayoral administration's push for '2,000 rooms for 2000' actually resulted in the addition of nearly 3,700 new rooms across all price points citywide," said Jay White, a hospitality services analyst at Ernst & Young. Hence, hotels should be open to negotiate as the market continues to absorb the new supply.
When the Residence Inn—Marriott's upscale extended stay brand—opens, Marriott will have three of its core brands operating close to each other downtown. "With Residence and the Courtyard, plus the existing Philadelphia Marriott and the Ritz-Carlton—another part of Marriott—we'll have a strong presence in a prime location," said Christian Mari, general manager of the 1,408-room Philadelphia Marriott, which is attached to the convention center. "From a distribution point of view, Marriott's strategy in a city like this is to have properties available with an array of rates and service levels. The new additions to the portfolio move us closer to achieving this."
Demand in Philadelphia as a whole had increased from the city being a drive-in destination from both New York and Washington. "After Sept. 11, people felt more comfortable with cities they could drive—as opposed to fly—to," said Scott Wiseman, general manager of the Sofitel. "It was true for individual travel as well as group." Similarly, Wiseman noted that Amtrak service to Philadelphia also has been a benefit this year.
At Loews, director of sales and marketing Anthony Del Gaudio has seen an increase in group bookings, which he attributed to Philadelphia's central location. "In other, more secure, less cost-conscious times, pharmaceutical companies might have chosen meeting sites further away," he said. "But suddenly, they're interested in staying closer to headquarters."
Business travelers' security concerns have translated into an increased interest in the basics. "Comfort food items, for example, are more popular in our restaurants and room service," said Myra de Gersdorff, general manager of the Ritz-Carlton. Providing for guests' physical comfort, always a high priority, is even more of a concern. "Accordingly, we've just introduced a pillow menu, where guests can select their preference from among eight varieties," she said.
As part of its recent multimillion-dollar renovation, the Four Seasons instituted a "perfect room" initiative. "Business travel seems to be on the upswing, growing stronger steadily month by month," said Kevin Galica, director of sales. "But our guests still expect the highest levels of service, regardless of the economy. So we're upgrading rooms even more, for example, installing cordless telephones and CD clock radios. In addition, we're going room by room, replacing soft goods and making any repairs—no matter how minor—that might be needed."