Behind the steel curtain lies a hotel development scene set to explode this year. Here’s a quick guide to the many factors driving this growth.
The City of Bridges is about to go through a bit of a growth spurt in hotel development. “The bulk of Pittsburgh’s supply increase is going to be realized this year,” says Tony Biddle, associate at PKF Hospitality Research. “Healthy demand should cushion the blow from the additional supply coming in, but probably drop off a point or two in occupancy for 2015, before recovering in the following years as that new supply is absorbed.” He points to the 248-room Hotel Monaco that recently opened and the 229-room Embassy Suites set to arrive at the top 11 floors of a downtown building in the fourth quarter. Other hotels coming to Pittsburgh’s urban core this year include a Hilton Garden Inn, a Hyatt House, a Homewood Suites, and a Holiday Inn Express & Suites.
A number of things are driving this building frenzy. “Pittsburgh’s done a good job of transforming its economy from industrial-based into what I’ll call meds and eds-based and then extending into related industries like pharma,” says Biddle. “It’s now home to nine Fortune 500 companies.” Another big boon for hotels has been the recent investments that have been made in sporting facilities like Heinz Field, PNC Park, and the Consol Energy Center. Now all Pittsburgh needs is a few more rivers and a winning sports franchise or two.
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STRAIGHT TALK ON PITTSBURGH
Lauro Ferroni, director of hotels research at Jones Lang LaSalle, says the dynamics driving Pittsburgh’s explosion in hotel supply come down to pent-up demand and natural gas.
- For the most part, Pittsburgh’s new hotel supply isn’t being built through massive city subsidies or tax breaks. The investors are picking submarkets where they can demonstrate healthy demand and meet it with a well-respected brand that isn’t expensive to build or operate.
- The energy sector is the biggest driver when it comes to diversifying the area’s demand generators and increasing office space. Some of the most active shale natural gas drilling areas in the United States are around the city.
- Upscale select-service hotels currently comprise the majority of properties on the drawing board in Pittsburgh. It’s worth noting that these are new builds, not conversions of existing properties.
- That said, the boutique hotels being built in Pittsburgh are a sign that an increasingly sophisticated investor and developer base is looking at this market.
- College, pro, and even high school sports are significant demand generators in Pittsburgh and can fill as much as 10 percent of the market on weekend nights.
