Center City hotels' occupancy is tough balancing act

The price of a hotel room in Center City significantly lags other competitive East Coast cities, such as New York, Washington, and Boston.

Though the consumer is the beneficiary, the price differential has made for some sleepless nights among local hoteliers, who say the current average daily rate (ADR) is barely enough to cover the costs of keeping the lights on and cleaning the sheets.

The recent controversy over the number of new rooms needed to support the expanded Convention Center brought their predicament to the forefront. Though room rates are slowly edging up, hoteliers contend they are nowhere near pre-recession 2007 and 2008 levels.

In those years, the ADR was $166.79 and $171.70, respectively. This year, it's $154.82.

"It is important that we do not overbuild and saturate the market with too many hotel rooms, which would affect the financial stability of current hotels," said James Gratton, president of the Greater Philadelphia Hotel Association and general manager of the Courtyard by Marriott Philadelphia Downtown.

In 2000, when Philadelphia hosted the Republican National Convention, the city did just that, hospitality-industry experts say, adding 4,000 hotel rooms. Supply quickly outpaced demand.

This year, the supply issue was revisited in anticipation of the Convention Center's $786 million expansion. The bigger venue is the 14th largest convention center in the nation and for the first time allows the city to host two major events simultaneously.

For the Philadelphia Convention and Visitors Bureau, the agency charged with booking space at the Convention Center, the more new hotels at its doorstep, the better.

"Both meeting planners and show organizers want . . . their attendees to walk to and from the Convention Center, thus reducing transportation costs or having to bus them," said Jack Ferguson, the bureau's president and CEO.

Ferguson championed the need for at least 2,000 more rooms - boosting the city's total to 12,500 from 10,700 - to support the 62 percent-bigger Convention Center,

"With that inventory, we would be able to handle all demand segments . . . and still have our hotels running occupancies greater than 70 percent," he said on the eve of the expansion's March debut.