To serve a bigger center, city needs more hotel rooms

To maximize a city's position in the national realm of convention-hosting, there is an exquisite tension between the size of a convention center and the number of hotel rooms that will serve it.

Even with the expensive expansion of the Convention Center, Philadelphia has not found that sweet spot, and that's what keeps Jack Ferguson up at night.

Center City is about 2,000 hotel rooms shy of convention nirvana.

"Today in Center City, we have over 10,600 hotel rooms . . . with occupancy above 70 percent," Ferguson, president and chief executive officer of the Philadelphia Convention and Visitors Bureau, said in an e-mailed response to questions. "With a 60 percent increase in the size of the center, a total hotel inventory of 12,500 rooms in Center City would be ideal.

"With that inventory, we would be able to handle all demand segments - convention and groups, the commercial traveler, leisure traveler, and international traveler, and still have our hotels running occupancies greater than 70 percent."

The numbers matter greatly to the hotels. Ferguson estimated that a convention with 6,000 to 7,500 attendees - filling 50 percent to 60 percent of the Center City hotels - allowed the hotels to accommodate the non-convention customers and, therefore, not lose that other revenue.

Without the additional hotel inventory, the Convention Center, the city, and the hoteliers are leaving money on the table. And money from conventioneers is the whole reason for the expansion of the center.

Having hotels in the right locations is critical.

"Both meeting planner and show organizer want convenient hotels adjacent [to] or near the center," Ferguson said. "They want their attendees to walk to and from the center, reducing transportation costs . . . from having to bus them.

"A great feature of the Philadelphia package [is] a walkable city."

None of this is news to the people who planned the expansion. Additional hotels were always part of the strategy, but then the economy refused to cooperate.

Peter Tyson, vice president of Colliers PKF Consulting USA, which tracks the region's hospitality industry, said more than 25 Center City hotel projects, totaling more than 5,000 rooms, had been rumored, proposed, or announced in the gentler times of 2007 and early 2008.

Of those, five (two on Broad Street, two on Arch Street, and one on the Girard Estate parcel, totaling more than 2,000 rooms) were intended to support the bigger Convention Center.

With the softened lodging market, Tyson said, and with a dearth of traditional financing accompanying the recession, all but a few of those projects were shelved, causing the room shortfall.

Meetings and conventions still make up the largest hotel-demand segment in the city - 35 percent last year. Individual business travelers made up 31 percent, and leisure travelers accounted for 30 percent of all booked rooms in 2010.

The openings of the Palomar and Le Méridien in the last 18 months added 432 rooms to the city's inventory, for a total of 10,606 downtown rooms. But by comparison, New York City has 66,526 rooms, Washington 27,431, and Boston 18,196.

Another hotel that could serve as headquarters for a second convention group, with 600 to 1,000 rooms and meeting space, was critical for the expansion, Ferguson said. It would enhance the 750-room Sheraton City Center Hotel by becoming another anchor hotel.

He said such a hotel would ideally be on North Broad Street so conventioneers staying there could use the new entrance on Broad Street and a second group could use the original entrance at 12th and Market Streets.

"Currently, the majority of concentrated hotel inventory is located on Market or near Market Street," Ferguson said. "Locating a larger hotel near Sheraton City Center provides greater flexibility of handling two groups and, logistically, not intervening on one another."

A few midsize hotels are slated to be built in the next two years: a 270-room Monaco hotel in the Lafayette Building, which is being converted in the historic district at Fifth and Chestnut Streets; a Homewood Suites in University City; and a midmarket hotel at the Pincus Bros. site at 401 Race St. A few others, Tyson said, may be announced in the coming months.