Philadelphia market is flying high now

PHILADELPHIA—The City of Brotherly Love is home to a number of American classics—cheesesteaks, the Liberty Bell, Rocky, to name a few. And, right now, it is also home to a thriving hotel market.

By year-end 2018, Philadelphia hotels are forecast to see a RevPAR increase of 7.7%, according to CBRE Hotels’ Americas Research. This is the result of an estimated increase in occupancy of 3.6% and a 3.9% gain in ADR. The 7.7% boost in Philadelphia RevPAR is better than the national projection of a 2.8% increase.

Leading the way in 2018 RevPAR growth is the lower-priced segment of Philadelphia. The properties in this category are forecast to attain a 2.3% gain in ADR and see a 5.2% increase in occupancy, resulting in a 7.6% RevPAR increase. Upper-priced hotels are projected to experience an ADR growth rate of 4.9%, along with a 2.4% gain in occupancy, resulting in a 7.4% RevPAR increase.

Looking toward 2019, Philadelphia RevPAR is expected to grow 3.1%. This is less than the rate of growth in 2018. Unlike 2018, prospects for RevPAR growth in the upper-priced segment (3.5%) are better than in the lower-priced segment (1.4%). Philadelphia market occupancy levels are expected to range from 69.4% to 71% during the five-year forecast period.

Meryl Levitz, president/CEO of Visit Philadelphia, noted there are a number of reasons why the city attracts visitors. “Affordability, accessibility and character—all are equally important,” she said. “For business and leisure travelers, Philadelphia is easy to get to. We’re two hours or less driving from DC, Baltimore and New York City. In fact, we’re a half-day’s drive for a quarter of the population… You can do a lot in the city, or drive easily to regional attractions like Longwood Gardens, Valley Forge National Historical Park or Bucks County. Philadelphia is also very affordable, which makes it a great option for families or groups visiting for our rich history, eclectic food options and museums. And, as travelers’ tastes get more varied, so do our hotel offerings.”

The city has seen its annual visitation rate rise 86% in the last 21 years. With that increase, there has also been an increase in the supply of hotel rooms. “Since 1997, there’s been a 74% increase in total available hotel room nights, from 2.4 million in 1997 to 4.2 million in 2018,” said Levitz.

That number will soon increase with 10 hotels having opened or scheduled to open in the next year. “The 10 new properties coming range from the six-room, invisible-service Lokal to the Four Seasons that will be located on the 57th floor of the new Comcast Technology Center,” she said, “Altogether, these new hotels are unlocking 1,902 new rooms to meet visitor demand.”

Cambria Hotels recently made its official debut in the city with the grand opening of the 223-room, 15-story Cambria Hotel Philadelphia Downtown Center City. “As a Philadelphia native, I’m honored to witness the growth of our beloved city and be a part of the Cambria Hotels brand’s expansion,” said Jim Pearlstein, president of Pearl Properties, the hotel’s developer. “The Cambria Hotel Philadelphia Downtown Center City thoughtfully incorporates locally inspired designs and modern amenities, and will have a rooftop bar and restaurant to make it a welcome addition to the city and a gathering place for guests and locals alike. This hotel, which is our first, truly breaks the mold on Broad Street.”

Janis Cannon, SVP of upscale brands at Choice Hotels, sees the city as a good fit with the Cambria brand. “Philadelphia is experiencing record-breaking tourism and was recently ranked one of the best places to visit in the country by U.S. News & World Report,” she said. “The city has a rich history and culture, and Cambria Hotels allows travelers to immerse themselves in the essence of the destination. The Cambria Hotel Philadelphia Downtown Center City is located on the Avenue of the Arts in the heart of the city, and the hotel’s design is derived from the surrounding area.”

She continued, “This hotel also has special meaning because of the close and long-term relationship between Choice’s chief development officer, David Pepper, and Jim Pearlstein, both of whom are Philadelphia natives. With more than three decades of experience developing in Philadelphia, Pearlstein has helped build a hotel that captures the character and culture of this vibrant city, making it a perfect match for both out-of-town visitors and locals.”

On the horizon for the city is the dual-brand W Philadelphia and Element Philadelphia. The 52-story complex, which is scheduled to debut in the summer of 2019, will include 750 rooms between the two brands.

“Our hotel market is very diverse and expanding,” said Levitz. “We’re proudest of the fact that leisure visitors now account for one-third of the Center City hotel rooms nights, along with business and group, each accounting for a third as well. When we began marketing in 1997, leisure was just 14% of total Center City Philadelphia hotel room demand; it grew to a full third, 33%, in 2017. Since 1997, the leisure segment has been the fastest growing segment for hotel demand.” HB