Pittsburgh’s millennial boom boosts hotel business

Hotel Monaco in Pittsburgh (Hotel Monaco Pittsburgh)

Millennials are flocking to Pittsburgh, according to research that found the city is No. 3 on a list of 20 large cities experiencing such a boom. And that boom can only mean good things for the area’s hotel business.

Jason Fulvi, EVP of VisitPittsburgh, said there are many factors contributing to the millennial boom, including 59 colleges/universities within 50 miles of Pittsburgh that produce more than 40,000 students per year. He also attributes the boom to a diversified region of many different industries that provide jobs. Unlike the region in the 1970s and 1980s, when 64 percent of jobs were tied to the steel industry, today he said not one single industry makes up more than 24 percent. One budding industry comes in the way of tech, which attracts many young people to the area.

Looking for new ways to drive profitability from your hotel asset? Introducing Hotel ROI: An innovative one-day event series brought to you by Hotel Management and in partnership with the Asian American Hotel Owners Association (AAHOA). Hotel ROI focuses on the critical issues in local markets and delivers actionable insights for immediate implementation. Discover our 2017 cities at www.hotelroi.com.

“Slowly but surely, tech firms started staying around here because it is cheaper and there’s a lot of talent [from the area’s universities],” Fulvi said. In fact, one of the biggest tech giants, Google, has an office in Pittsburgh, which is the second-largest office the company has, according to Fulvi.

“These young people are in our 90 neighborhoods that for years have been depressed, and they are buying homes and fixing them up, changing the dynamic of these older neighborhoods,” he said. “Then they want cool restaurants, bars, brew pubs and all the stuff millennials are looking for with their way of life. It’s a snowball effect throughout the community.”

According to the research from Pew Charitable Trusts, 16.8 percent of the population in Pittsburgh was college graduates under the age of 35 from 2010 through 2014, a 6.3-percentage-point increase from the year 2000.

Related Story: Hoteliers not worried about Chicago’s population shift

Rob Mallinger, GM of the Hotel Monaco in Pittsburgh, said this large segment of people is crucial to hotel business.

“The millennial traveler pushes us to stay relevant and try new things,” he said. “With so many options out there and with millennials being so savvy, it requires us to be at the top of our game.”

To appeal to millennials, Pittsburgh has certainly stepped up its game. The city has developed hiking and biking trails as well as developed bike lanes on its roads, Fulvi said. To accommodate what the cohort is seeking in its experience, the budding food scene has become a big draw for the area. The city is also home to many cultural institutions, such as theaters and museums.

The hotel industry has seen a development boom as well, with about 6,000 rooms added to the region over the past eight years, according to Fulvi.

“A lot of that is driven because of the industries that have come up here,” he said. “Tech is a big one but also energy is a major player right now with Marcellus Shale. We’re sitting on one of the largest natural gas lines, which is driving a lot of development and also more jobs.”

According to STR, the Pittsburgh market has 48 hotels with 5,049 rooms under contract in the pipeline. Of those, 12 hotels with 1,275 are under construction. Demand growth (+5.2 percent) is outpacing supply growth (+3.9 percent) as of year-to-date June.

Related Story: Pittsburgh: A ‘solid’ city with lots of supply

Occupancy in Pittsburgh year-to-date June was up 1.2 percent to 57.1 percent, according to STR data. Average daily rate, meanwhile, was down 5.6 percent to $111.52 and revenue per available room decreased 4.5 percent to $63.68.

“Right now we’re at a pinnacle,” Fulvi said. “I think we’re looking at a turning point by 2020. We still have to absorb what we’ve taken on, but the construction is starting to slow down and lending is getting tighter.”

Mallinger isn’t worried about the new supply, either. “We are well prepared for that and prepared to weather what’s to come,” he said. “Although new rooms are coming in, we have a lot of new travelers, so we’re in a good position.”

Fulvi said many new travelers are coming from overseas thanks to increased airlift into the Pittsburgh International Airport. For example, Condor Airlines recently began offering nonstop flights to and from Frankfurt, Germany. Meanwhile, WOW offers flights to and from Iceland.

“We’re back in the international game,” Fulvi said. “We’re finding there is some great demand there because of the assets we have that are big draws.”

Related Story: Pittsburgh’s supply boom not a long-term concern for hotels