Hotel demand thriving in three secondary U.S. markets


Mention Cleveland, Oakland and Pittsburgh in the same sentence, and people might think they're in the middle of a discussion about some of the hardest-hitting American Football Conference teams of the 1970s.

But the three cities, long prided more for their toughness than their offerings as tourist destinations, are three of the more active U.S. hotel markets when it comes to increases in room demand during the past year.

The three cities are part of a secondary U.S. metro market whose occupancy during the recession and ensuing rebound moved lockstep with the larger, more glamorous markets but whose average room rates didn't plunge as much during the depths of the downturn as the larger cities.

And those cities are no longer known just for activities such as manufacturing and shipping.

Pittsburgh progressed from its emphasis on steel production to a more diversified economy with a strong educational backbone.

Oakland has benefited from many new technology companies moving in from neighboring San Francisco and from nearby Silicon Valley.

Cleveland has gained visitors, in part, from a thriving medical-tourism industry.

And all three cities have committed resources toward improving their respective arts scenes.

Cleveland: No mistake

Aloft Cleveland DowntownHaving long ago shed its primary reputation as a hardcore manufacturing town and eager to dump its "Mistake by the Lake" tag, Cleveland has been steadily establishing itself as an arts and cultural destination since the city's Rock and Roll Hall of Fame Museum opened in 1995.

At the same time, demographics and a growing medical tourism market have worked in the city's favor as more people visit the 1,400-bed Cleveland Clinic.

Either way, Ohio's second-largest city, behind Columbus, is in the process of getting $2 billion in infrastructure improvements, which include the June opening of the Cleveland Convention Center. Meanwhile, the Global Center for Health Innovation will open in October, while the Cleveland Museum of Art will complete its renovation and expansion by year's end.

And visitors are responding in kind. Cleveland's revenue per available room (RevPAR) for the first seven months of the year jumped 12% from a year earlier, marking the largest jump of any city in the U.S. central region and reflecting room and occupancy rates that advanced 6% and 5%, respectively, according to the research firm STR. And while occupancy through July stood at just less than 62%, room rates during the previous two years had advanced 11%, to about $94 a night.

Hoteliers are poised to respond by adding to Cleveland's stock of about 21,000 rooms. Starwood Hotels & Resorts' 150-room Aloft Cleveland Downtown opened in June, while the hotelier will open a 484-room Westin in the city next year. There's also a 650-room convention-center hotel in the works for 2016, though no brand or management company has been chosen.

"We'd been without a fully functioning convention center, so we'd been out of the meetings market for a while," said Colette Jones, vice president of marketing for Positively Cleveland, the city's convention and visitors bureau. "It's a really exciting time."

Pittsburgh: Steel Town softening up

Fairmont PittsburghKimpton Hotels & Restaurants has long been known for its individualistic design approach, fine-dining focus and overall Bay Area sensibilities, so it speaks volumes that the San Francisco-based boutique hotelier is preparing to enter a city long primarily associated with the steel industry.

But Kimpton, whose 247-room Hotel Monaco Pittsburgh is slated to open in the city's 110-year-old James H. Reed Building next year, is merely joining other hoteliers lured to the Western Pennsylvania region for its growing tech industry, strong academic scene and increased focus on the arts.

Indeed, between July 2012 and July 2013, Pittsburgh increased its room stock by 2.3%, to almost 25,000 rooms, and its new-room total of 563 for that period was the second-highest in the U.S. northeast region, according to STR.

And while Pittsburgh's RevPAR has changed little in the past year because of the new stock and resulting loss in occupancy rate, its room rates were still up 3.8%. In fact, Pittsburgh's room rates as of July were 9.3% above the city's pre-recession peak, marking the best performance of any of the U.S. markets ranked between 26 and 50.

Overall, Pittsburgh has added about 1,000 rooms within the past two years, and while that additional stock has pushed occupancy down to about 65%, room rates are up 8.2%, to $111.12.

"Pittsburgh is a logical choice for expansion, especially given the relative lack of boutique style properties and high demand for that here," Kimpton CEO Mike Depatie said. "With many Fortune 500 companies, universities and a thriving technology sector, Pittsburgh deserves a great boutique hotel."

Oakland: Bridging the gap

Oakland Marriott City CenterA look at the rising demand for hotels in the neighboring San Francisco-San Mateo and San Jose-Santa Cruz markets might suggest that Oakland is largely benefiting from an overall visitor jump to the Bay Area.

Still, the city, which is either a 4.5-mile drive across the Bay Bridge or a 10-minute train ride from San Francisco, has also been the beneficiary of growth in both traditional and new-economy companies — e.g., Clorox and Pandora — and of a thriving retail and entertainment environment.

Specifically, the city government has provided development incentives that have resulted in about 40 restaurants and retail stores opening in Oakland's downtown in recent years. Additionally, the historical Fox Theater, which reopened in 2009 after a $68 million rehab, and the Paramount Theatre anchor an uptown district where much of Oakland's cultural activities take place.

With about 24,000 rooms, Oakland's room supply is about identical to what it was two years ago, and occupancy is at about 74% year to date. Meanwhile, room rates through July averaged $101.10, an increase of 18% from two years earlier but still about 45% less than San Francisco's.

Oakland's RevPAR through July jumped 14% from a year earlier, the most of any city in the U.S. western region. Room rates advanced 8%, while occupancy increased 5%.

"It's kind of the same way that Brooklyn has developed," said Kelley Kahn, director of economic and workforce development for the city of Oakland. "People are coming to Oakland to be in Oakland."

Follow Danny King on Twitter @dktravelweekly. 


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