The W Hotel Tax Break: Foolish or Defensible?

After looking at the numbers, it may make sense after all. But it still requires other developments to make it work.

1441 chestnut street

Photo of 1441 Chestnut Street via Philadelphia Real Estate Blog

So let’s see if I’ve gotten this right: The real reason the bigger, bolder Pennsylvania Convention Center is empty much of the time and getting emptier is because we don’t have enough hotel rooms.

This comes as a total surprise to me. Here I’ve been laboring under the conventional wisdom that the center’s well publicized labor (and labor cost) problems are the main reason conventions are staying away in droves.

But the No. 2 at the Philadelphia Convention and Visitors Bureau, Julie Coker, told City Council last week that meeting planners are asking her when the proposed W/Element Hotel at 15th and Chestnut streets will get under way.

It seems that we don’t have enough large blocks of hotel rooms available to accommodate major conventions, if I understand her right. This hotel would help solve that problem. That alone should justify the $33 million tax break Council’s Finance Committee voted for last Wednesday.

If Coker’s right, that is. Other hotel owners in this town disagree, and frankly, I have my doubts.

The narratives that have surfaced in the media in the years since the Convention Center opened have remained pretty consistent: Large association or trade group books huge convention or show at the PCC. Attendees say they had a great time here. Afterwards, someone at said association or trade group lets it be known that, for all the fun everyone had, they won’t be returning to Philly because dealing with the union labor at the center was such a hassle, or the bill was unexpectedly huge, or both.

However, there are some numbers that suggest Coker may indeed be right. Last year, room-nights in Center City hotels hit an all-time high of 2.9 million. Only 28 percent of that total came from individual leisure travel, which means that the remaining 72 percent came from business travel and the convention trade.

The room occupancy rate of 73.4 percent, moreover, came close to the all-time high of 74.1 percent set in the pre-recession year of 2007.

Those figures suggest two things. One is that there really is room to add more rooms at our inns. The other is that all this business must be coming from the small- to medium-sized fish in the convention sea, for unless I’ve misunderstood all those news reports, the big conventions the expanded center was supposed to acommodate in tandem are shrinking in number over the next few years.

Will more hotel rooms in Center City reverse that trend all by themselves? Not even Coker says this; in her Council testimony, she called the W/Element hotel project “an important – but not the only – element required to realize the full potential of the expanded Convention Center.”

Clearly, the new private manager for the PCC will have to get that facility’s act together in order for these added hotel rooms to have the desired effect. But given that just about every other new hotel in this city over the past decade plus received some kind of public subsidy to get built, and given that it does appear the market can support it, calling this particular tax break unwarranted does seem more like “jealousy” (Brook Lenfest’s term for it) than any sudden outbreak of fiscal prudence (which we could also use all the same).