Philadelphia in midst of hotel-building frenzy

Philadelphia is in the middle of its biggest hotel-building binge since the late 1990s, as developers rush to accommodate an expected burst of business travelers, tourists, and conventioneers.

Eight hotel projects now in the planning stage or under construction in and around Center City would bump up the number of rooms by more than 2,000, or almost 20 percent, from current levels - the sharpest increase since the surge that surrounded the Republican National Convention in 2000.

The new hotels range from a Four Seasons atop the Comcast Innovation and Technology Center, which when completed will be one of the country's tallest buildings, to boutique projects such as the planned transformation of a historic court building just off Benjamin Franklin Parkway into a Kimpton Hotel.

Center City-area hotel-occupancy rates reached almost 76 percent last year - the highest since 1949 - from a bit over 73 percent in 2013, according to industry-tracker PKF Consulting/CBRE Hotels.

Boosters say the increase in rooms is needed to sustain the city's growing national profile as a travel destination. Driving the demand are increased activity at the Pennsylvania Convention Center, the city's growing medical and tech industries, and a louder-than-ever national buzz about Philly as a great place to visit.

"I think the product of Philadelphia - making it fresh and new, expanded with more hotel rooms - will do nothing but increase all three of the business and the convention and the leisure travelers," said Elizabeth Barber, associate dean of Temple University's School of Tourism and Hospitality Management.

Ed Grose, executive director of the Greater Philadelphia Hotel Association, said he's seeing "more optimism in the industry than I have ever seen."

Others caution, however, that the construction boom could leave the city with a glut of rooms.

Though occupancy rates in the Philadelphia region are up from 2009, when they sank to a 20-year low, they still lag far behind rates in New York and Boston, according to data from Jones Lang LaSalle, a commercial real estate services firm, and Smith Travel Research.

"Philadelphia is a good market, not a 'Wow, unbelievable' market," said Andrew Benioff, a hotel specialist at Philadelphia's Llenrock Group real estate finance and advisory firm. "With this new supply, I think it's maybe a little too much."

If all the projects now being built or planned are completed, 2,000-plus hotel rooms will be added to the current stock of about 11,500, said Peter Tyson, a senior vice president at PKF Consulting.

That would be the biggest increase since the period between 1998 and 2001. About 10 hotels with nearly 4,000 rooms were added then as Mayor Ed Rendell promoted the work as vital to attracting the Republican convention in 2000, Tyson said.

But in the aftermath of that boom, which included construction of the 306-room Sofitel and conversion of the PSFS Building into a 581-room Loews property, occupancy rates plummeted.

Center City hotels were 60 percent occupied, on average, in 2001, down from 68 percent in 1999, as the attacks of Sept. 11, 2001, took their toll on the travel industry, Tyson said.

"There was a general optimism that the market was really starting to catch fire and that these new hotels were really needed," he said. "But I think they overdid it."

Now being built is the 222-room Four Seasons that will fill the top 12 floors of Comcast's new 59-story tower, due for completion in 2017.

And on Wednesday, crews began constructing a 51-story tower near City Hall that will include 755 rooms that will be shared by the mid-market Element by Westin brand and a higher-end W Hotel. This will be the city's third-biggest hotel, after the 1,408-room Marriott Philadelphia Downtown and the 757-room Sheraton Hotel Philadelphia Downtown.

Other plans call for converting existing structures into hotels.

The former Family Court building at 18th and Vine Streets is being redeveloped into a 200-room Kimpton Hotel. Another proposal calls for transforming the 21-story Liberty Title & Trust building on North Broad Street into a 178-room Aloft Hotel by Starwood.

Developer Chancellor Hotels, meanwhile, is negotiating with Morgans Hotel Group to build a second branch of New York's trendy Hudson Hotel here, said Vince Powers, a Chancellor spokesman. It would have 310 rooms.

"What's on the docket now," said Tyson, "is a lot."

Some of the demand is expected to come from increasing activity at the Pennsylvania Convention Center, which completed an expansion in 2011. Last year, the center also secured an agreement from its unionized workforce to meet customer-satisfaction criteria. That is expected to draw more events.

Since 2012, the center has been hosting about nine conventions a year that occupy the entire expanded facility, such as last week's Biotechnology Industry Organization event, said Jack Ferguson, president and chief executive of the Philadelphia Convention and Visitors Bureau.

Such events draw more visitors than the city's current hotel-room inventory can support, Ferguson said.

Hotel planners expect an increase in business travelers as the city's technology and medical industries grow.

New York-based Hospitality 3 broke ground in May on the 212-room Study hotel on the campus of Drexel University in University City, a hub of medical and technological research.

Additional hotel guests are expected to be attracted by the city's new tourism cachet. The New York Times and Condé Nast Traveler recently named Philadelphia one of the top U.S. travel destinations and the world's No. 2 shopping city.

That profile is bound to rise even higher as Philadelphia hosts the World Meeting of Families and a papal visit in September and the Democratic National Convention in July 2016, Tyson said.

"It says, 'Boy, Philly is on the world map,' " he said.

All of which could tip the balance in favor of the new hotels, as guests are drawn to their freshness and novelty, Llenrock's Benioff said.

"Newer product always trumps older product," he said. "So if there are any hotels there that are old and tired - and there are a number of them - they're going to suffer the most."

Source: Philly.com