November 13, 2012

Portland's room boom cracks door to overload

Maine hotels are enjoying record sales, but is it enough to support 780 new units?

By Jessica Hall jhall@pressherald.com
Staff Writer

Revenues from Maine's hotel industry hit their highest level ever this year, and proposals for four new hotels in Portland and the renovation of another could add an estimated 780 rooms in the city.

Today's poll: Portland tourism

Can the Portland tourism market support the new hotel rooms coming into the market?

Yes

No

View Results

click image to enlarge

A Commercial Street parking lot at J.B. Brown & Sons is the proposed site of a 131-room Courtyard by Marriott that's expected to open sometime in 2014.

Gabe Souza/Staff Photographer

click image to enlarge

But some are questioning whether they're actually needed, citing overnight tourism rates that are up only slightly.

Tourism officials and economists counter that new hotels will draw more visitors as the economy improves, and some managers of established hotels say they would ramp up efforts to attract new business with more competition in town.

"When a new property comes on the market, we typically sharpen up our game a bit," said Sean Riley, chief executive of Maine Course Hospitality Group, whose properties include the Courtyard by Marriott in South Portland. "Some people choose to just panic. But a rising tide lifts all boats. It makes the market more vibrant overall and more of a destination."

Other hotel operators, however, aren't so sure.

Sam Patel, the manager of the Rodeway Inn in Saco, says there's a balance now among hotels in the surrounding suburbs and beach communities, with just enough space for all of them to be busy in the summer. Extra rooms may disrupt that balance.

"In the summer, all the hotels are doing well," he said. "Some days everyone is full. It's probably better not to have more hotels."

The anticipated boom in Portland comes as total statewide revenue from lodging sales set a new record of $719 million over the past 12 months.

That's up 6 percent from the previous year, marking the first time ever that Maine hotels have exceeded $700 million in sales.

While the average daily rate for rooms has fluctuated some in the bad economy, it hasn't changed much, ranging from $93.42 to $110.33 from 2006 to 2012, according to research firm STR.

Those in the industry say the record revenue is not a fluke, but part of a steady increase that is expected to continue.

"It's sustainable. We may not grow at the rate we did this year, but anything builds on this level," said Greg Dugal, executive director of the Maine Innkeepers Association. "The only negative year we've had was 2009. Even 1 or 2 percent growth is still higher -- and national projections call for much higher growth. Seven hundred million dollars -- it's a benchmark that's never been hit here before."

The Greater Portland Convention and Visitors Bureau has said it would like to see year-round hotel occupancy above 70 percent before new rooms are added.

Occupancy rates in Portland so far this year have been about 61 percent, roughly on par with the first nine months of last year, according to STR. The occupancy rate has ranged from a low of 36.5 percent in January to a high of 84.7 percent in August, STR said.

During weekends from July through October, occupancy hit nearly 100 percent capacity in Portland, said Carolann Ouellette, director of the Maine Office of Tourism.

Overnight visitors in the Greater Portland area tend to be in their late 40s, with median incomes of more than $100,000, tourism studies show. They tend to be highly educated, with college degrees or higher. That makes them prime candidates for higher-end properties coming on the market.

"The leisure and hospitality sector is one of the three major growth sectors in my economic forecast, which indicates the national demand for travel is expected to increase over the next several years and Maine will get its share of that demand," said Charles Colgan, professor of public policy and management at the University of Southern Maine's Muskie School of Public Service.

Traffic volume through the York Toll Plaza rose 1.3 percent from May through July, compared with the same period a year ago, Colgan said.

By contrast, airline passenger traffic into Portland dipped 1.9 percent to 1.67 million passengers last year, according to statistics from the Portland International Jetport.

A look at lodging statistics shows that the numbers of visitors who spent a night in Maine are on a slight rise.

In 2011, Maine saw nearly 38 million total visitors, including more than 20.4 million day visitors and more than 17.8 million overnight travelers, according to a study prepared for the Maine Office of Tourism. The number of overnight visitors rose 2.2 percent from the prior year, while the number of day-trippers rose 3 percent.

Whether that slight gain in overnight travelers will actually support the number of new hotel rooms in Portland is still not known, some argue. Currently there are roughly 2,200 hotel rooms in Portland and 3,500 rooms in the Greater Portland area, according to the innkeepers association.

The weekend occupancy rates got a boost from the temporary closure and revamping of the Eastland Park Hotel. Eastland is undergoing a makeover and will reopen as the Westin Portland Harbor Hotel in 2014.

Other projects near the Portland waterfront include a 131-room Courtyard by Marriott at the corner of Commercial and Maple streets, as well as a 123-room hotel on Fore Street and a 110-room boutique hotel on Congress Street in the former Portland Press Herald building. The $105 million mixed-use development site at Thompson's Point also includes plans for a 125-room hotel.

Those projects come on top of two hotels that opened in the last three years -- the 179-room Residence Inn by Marriott and 122-room Hampton Inn.

Hotel operators have mixed views about the need for so many new properties.

Some argue that the 100 percent weekend occupancy levels and the $300 per room charges seen this past summer and fall mean the area needs more rooms, while others suggest that the tourist season is too seasonal to support more year-round hotels.

"I've spoken to pleasure travelers and business travelers who have noted that it's (no more) expensive to stay in Boston and other big cities ... Over time, that could make Portland become a less attractive option," said Vincent Veroneau, chief executive of J.B. Brown & Sons, located behind the Courtyard by Marriott site on Commercial Street that's aiming to open in 2014.

There are things hotel operators could do in the off-season to attract business, such as heavy discounting. While the average daily rate of a Portland hotel is about $135.88 in August, it's $81.15 in January, according to STR.

The arrival of new properties could be a novelty to attract tourists for a few years, but over the long run there could be an oversaturation of the year-round market. The city needs to get more creative with year-round festivals, concerts and plays to draw people to stay in town, Dugal said.

"There's no question that the new properties will raise the profile of the city. If there's excess inventory, some will have to discount to get business," Dugal said.

"Fall has been very strong. Baby boomers are going to continue to push September and October to be better and better. With July and August, we have four really good months.

"The question is -- what happens about the other eight months? City hotels don't shut down. They're not seasonal."

Veroneau said he thinks Portland will continue to be a strong tourist destination.

"Our market research shows that the city can support more properties. Our summers are stronger. Our shoulder seasons are broader than they used to be. The downtown hotels will weather the winter," Veroneau said.

"There are travelers who want a downtown experience, not a suburban experience, so there's demand for city hotels." 

Staff Writer Jessica Hall can be contacted at 791-6316 or at:

jhall@mainetoday.com

 

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Today's poll: Portland tourism

Can the Portland tourism market support the new hotel rooms coming into the market?

Yes

No

View Results