More rooms on the way as hotel industry bounces back

The former Sheraton, shown this file photo, is now operated by Delaware State University. It will be converted to temporary student housing.
The former Sheraton, shown this file photo, is now operated by Delaware State University. It will be converted to temporary student housing.

More hotel rooms are coming on line as the  industry slowly  climbs out of a painful downturn.

Coming in March is a new Westin on the Wilmington Riverfront. Also under construction in a Sheraton Four Points and a Hampton Inn, both in the Newark-Christiana area. The Westin will be attached to the Chase Center on the Riverfront, fulfilling a long-term goal of having a full-service meeting and convention facility in the city.

This follows the opening of the Sheraton Wilmington South, New Castle, at the site of a former Radisson. The did not open for several years, due to a dispute over the size of the structure with New Castle County. The property was also owned for many years by Delaware Park, which did not move to reopen the property as competition intensified.

Still the recovery of the industry remains fragile with the prospect of added rooms likely to keep pressure on room prices. Statewide occupancy rates remain below 60 percent as of September, according to figures from the Delaware Hotel and Lodging Association.

“We’re not back to where we were in 2007,” said William Sullivan, general manager of the Courtyard by Marriott at the University of Delaware, Newark. In the peak year of 2006, occupancy rates statewide were around 65 percent. Occupancy rates have continued to recover, aided by a lack of new construction.

Sullivan is optimistic the northern Delaware  market can absorb the additional space, since the area has seen little new hotel construction since 2008. He notes that conditions have improved to the point that owners have been able to make the renovations necessary to keep their franchises and not “lose their flags.”

In one potentially surprising development, local developer Ernest DelleDonne told the News Journal that studies indicate a market study of the new University of Delaware STAR campus shows the area could support a hotel at the site. DelleDonne was selected as the developer for the former Chrysler plant site.

Franchisers, after giving hotel owners some leeway during the economic downturn regarding renovations, are insisting that properties remain up to date in the current market, Sullivan said.  At the same time those companies want to see their  flags in the market and will sign up with developers.

The Newark-area market remains steady, according to Brad Wenger, general manager of the Hilton Wilmington/Christiana. One big plus, according to Wenger,  has been the growth of student lender Sallie Mae, which has its headquarters a short distance away from the  Hilton.

The company brought more than 1,000 jobs to Delaware and helped the financial services sector in the state weather the downturn. Of late, other large financial serivces employers have been adding staff in the Newark area.

Sallie Mae aids market

The retail growth at Christiana Mall is also drawing visitors to the area, some for overnight stays. So far, the new “flyover” ramps at the key Route 1-I95 merge seem to be working well, Wenger says.  That augers well for  Christiana Hilton, which has endured years of roadwork in the area.

Wenger says Delaware Park visitors are  accounting for fewer hotel occupancies as the casino-racetrack struggles with competition from out of state. In Newark, the University of Delaware has provided a steady flow of customers, according to Sullivan.

The success of the Westin “could be a positive” for the entire market if it helps land overnight  meeting and conference business, Wenger said. That business remains highly competitive and comes with long lead times for groups booking space. One question is whether the added supply of rooms during any build-up of conference business  will lead to discounting.

Over-building  in Dover

The north Wilmington market remains a question mark as AstraZeneca cuts back employment and  puts commercial real estate on the market. An unidentified buy agreed to purchase the Doubletree, the largest hotel in that area,  for $27 million, a price that raised a few eyebrows, given the prospects for growth in the area.

Another casualty of the downturn has been come in the form of lower attendance during the two NASCAR weekends at Dover International Speedway, Sullivan said.

Race fans used to fill up rooms throughout the state, but that is no longer the case Offsetting the trend to some extent  is the new Firefly Music Festival at a portion of the raceway complex that added to hotel revenues early this summer.

The drop in NASCAR attendance at Dover came at a time when Dover was seeing a glut of hotel rooms in the market, according to  Cindy Small, director of the Kent County and Greater Dover Convention and Visitors Bureau.

The overbuilding had its roots in high hotel occupancy rates after September 11th. Dover Air Force Base ended up on a wartime footing and hotel developers raced to add rooms.

Dover Downs also added rooms to its hotel, which racks up high occupancy rates, partly from customers who get free or reduced rate rooms as incentives.  Occupancy rates in Kent County have struggled to hit 50 percent in recent years,  according to Delaware Hotel and Lodging Association figures.

Small also points to a triple whammy of slumping NASCAR attendance, the economic downturn and construction of casinos in Maryland and Pennsylvania. Also in the mix is federal budget issues and the recent government shutdown.

The number of rooms did drop with the recent lease of the Sheraton Dover to Delaware State University. The building will be used to house students while dorms are being renovated. The hotel was a popular conference and meeting spot that can’t be easily duplicated by other facilities at Delaware Tech, Delaware State and other locations.

Small says Dover Downs will be able to pick up some of groups,  but  the region will lose  business from  faith-based organizations and family reunions that are not comfortable with the hotel-casino setting, Small said. The bureau, according to Small, is now focusing on smaller conferences and motorcoach tour business that is not as dependent on larger blocks of meeting space. Dover does have a Hilton Garden Inn and Holiday Inn that have more meeting space than many limited  service hotels.

On the plus side, occupancy rates have shown a slight improvement. There were scattered signs that some hotels on the border of Kent County saw some spillover business from beach-goers.

“We’re headed in the right direction,” Small says.

Stronger summer in Sussex 

Sussex County saw a stronger summer. But hotel occupancy rates, while improving,  have not risen above 55 percent, even during the summer months, according to Hotel and Lodging Association figures. In the peak year of 2006, summer occupancy rates were approaching 70 percent.

Coastal Sussex did see the opening of a new Hyatt Place  this fall at Dewey Beach. General Manager Chris Strouss says the new hotel is seeing sell out or near sell-out weekends in its early existence.   Business during the week is also above projections.

Stouss says the hotel is the right product at the right time for the market, with its blend of amenities that include 24-hour light food service and access to  technology for guests who don’t want to stray  too far from their computer or other electronic device. That is no small matter in the tech-savvy Washington market.

The hotel will also get some holiday business from available catering services that bring holiday event business.

The Delaware beaches saw stronger visitor traffic than their New Jersey counterparts which saw fewer visitors.

While many New Jersey beach areas were spared the worst of the damage from Superstorm Sandy, the images from that storm kept some visitors away.

Strouss says the beach season is getting longer as outlet stores and a host of events sponsored by communities and chambers of commerce draw visitors into the area and keep available rooms occupied.

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