Could the City of Brotherly Love the next hot hotel market? Philadelphia might be known for its arts and entertainment, restaurants, history, and passionate sports fans, but now it’s also being recognized for its bustling hotel activity, with red-hot openings and exciting new developments on the horizon.
According to 2013 data from Jones Lang LaSalle, a hotel investment, advisory, and asset management firm, there are 361 hotels in Philadelphia with 45,390 rooms, making it one of the 25 largest hotel markets in the country. The average daily rate of a room in the city is $119 with occupancy averaging 67 percent.
Philadelphia’s economy is largely sustained by the education and healthcare sectors, and plays host to some of the top schools and medical facilities in the country, including the University of Pennsylvania and Thomas Jefferson University Hospital. The city is also seeing a surge in technology jobs, and the 2011 completion of the Pennsylvania Convention Center expansion has bolstered business travel to the region.
“Philadelphia’s ever-growing ability to dine, shop, and enjoy first-rate entertainment has recently captured the attention of a global audience of business and leisure travelers making it an unparalleled tourist destination,” says Carl Dranoff, president of Dranoff Properties, a commercial development company that recently announced plans to build a 47-story SLS Hotel and Residences at Broad and Spruce streets in the city. “As I have often said, Philadelphia is an overnight sensation after two decades of work by [the tourism bureau] Visit Philly.”
Philadelphia is strongly represented with long-standing luxury brands such as Four Seasons, the Rittenhouse Hotel, and the Ritz Carlton. Kimpton has also made its mark on the boutique scene with the Hotel Palomar in Rittenhouse Square and the 2012 opening of the Hotel Monaco in the Old City neighborhood, located across the street from Independence Hall. Home2 Suites by Hilton also opened its largest hotel in Philadelphia in 2013.
Dranoff describes the SLS development, as a “game changer.” The project, which is expected to break ground in 2014 with an opening planned for 2016, is being designed by Kohn Pederson Fox Association, and will be the tallest residential building in Pennsylvania. It will feature 150 rooms, a landscaped sundeck, an 85-foot indoor pool, and a full-service spa, and 125 luxury condominiums.
The hotel’s location on the Avenue of the Arts, is something that Dranoff believes will pay off. “I look at the Avenue of the Arts as a progression,” he says. “Its initial development as a center for culture and the performing arts set the table for me. The history and culture of the Avenue’s neighborhoods were chief among the reasons why we made our initial investment on South Broad — and why we continue to do so today.”
Although the SLS announcement generated plenty of buzz for Philadelphia, a planned Starwood dual-branded property is even more noteworthy. The combined 240-room W Hotel and 460-room Element by Westin, which will be located on Chestnut Street, will bring 700 rooms to the supply chain. The project has stirred some controversy because city council awarded a $33 million tax break to Chestlen Development to get the project off the ground.
Despite some opposition by other Philadelphia hotel owners, the Starwood project is expected to provide more overnight options for convention attendees when it opens in 2017.
“The next couple of years are going to be slow convention years for us,” says Ed Grosse of the Greater Philadelphia Hotel Association. “We need to make sure we have our convention center operating on all cylinders in time for this growth.”
It’s important to note, according to Jones Lang LaSalle, that Philadelphia supply increased faster than demand in 2013, resulting in flat revenue. But analysts at the firm believe that the lull is only temporary.
Mark Purcell, vice president of managed hotel development at Starwood, seems to agree. “We have a long history operating in Philadelphia and we’re optimistic about the city’s future growth and ongoing development,” he said in a statement. “We believe this project will help to raise the city’s profile as a leading destination for convention and meeting planners around the world.”
