Pittsburgh: A ‘solid’ city with lots of supply

The 207-room Drury Plaza Hotel in Downtown Pittsburgh opened in February. (Photo: Drury) (Pittsburgh hotel exterior)

Pittsburgh offers many demand generators that make Steel City a “solid core” destination, according to Paul Breslin, managing director of Horwath HTL.

“There’s tremendous business travel Monday through Thursday that makes for a steady base,” Breslin said. “On weekends, it’s heavy leisure travel due to sports, activities and annual events. That combination is really nice.”

Breslin said small conventions are a great boon to the city. While the market doesn’t necessarily enjoy citywide events, it does benefit from small city meetings that fill out multiple hotels.

“Pittsburgh is the ideal location for some geographically to get to, so it gets a lot of people,” Breslin said. “It was also rated a best place to travel in 2016, so they are riding that as well.”

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Additionally, the city is home to many major businesses that help drive hotel demand, according to HVS, including six Fortune 500 companies: Allegheny Technologies, H.J. Heinz, PNC Financial Services Group, PPG Industries, United States Steel and WESCO International. There also are several colleges and universities in Pittsburgh, including Carnegie Mellon University, University of Pittsburgh, Duquesne University and Point Park University.

Supply and Demand

But with a steady supply increase and lackluster demand growth, is the market becoming too supplied?

By the end of 2016, supply in the market grew 6.9 percent while demand fell 3.1 percent, according to data provided by STR. By January of this year, demand had made some rebound (+1.8 percent), while supply growth clocked in at 5.4 percent.

Likewise, at year-end 2016, performance metrics were down across the board, according to STR data. Occupancy dropped 9.3 percent to 59 percent. Average daily rate was down 0.4 percent to $118.72, while revenue per available room plummeted 9.6 percent to $70.04.

Even so, more projects continue to enter the pipeline for the Pittsburgh market. STR shows 54 hotels with 5,597 rooms under contract. Of those, 12 hotels with 1,296 rooms are in construction.

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Two key projects under construction in Pittsburgh, according to Breslin, are a 167-room Autograph Collection hotel and a 133-room AC Hotel by Marriott property. Additionally, a 155-room Even-branded hotel is expected to open this year.

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Cranberry Township

When asked about secondary or tertiary markets that developers have their eyes on, Breslin mentioned Cranberry Township, Penn., a suburb of Pittsburgh that is home to almost 30,000 people. It is also the location of UPMC Lemieux Sports Complex, the primary practice and training facility for the Pittsburgh Penguins.

“It’s a market driven by retail, residential, commercial and mixed use,” Breslin said.

STR shows seven hotels with 691 rooms under contract in the final planning and planning stages of the pipeline in Cranberry Township. While supply growth was muted (+0.8 percent) in 2016, by January 2017 that growth has skyrocketed (+9 percent). Demand growth, meanwhile, hit 5.1 percent in January after a decline of 1.2 percent in 2016.

Performance was down for all three key performance metrics in January for Cranberry Township, according to STR. Occupancy fell 3.5 percent to 53.1 percent; ADR was down 7.7 percent to $100.70; and RevPAR declined 11 percent to $53.47.

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