PROVIDENCE, RI—Rhode Island’s hotel market is expanding. As the traveler economy in the state reaches new heights, hotel development is taking off, despite various regional and nationwide challenges.
“Rhode Island’s traveler economy is rapidly developing, reaching a new high of $6.5 billion last year, representing a 5.4% increase and a cumulative growth of 23% over the past five years,” said Mark Brodeur, director of tourism, Rhode Island Commerce Corporation.
He attributed Rhode Island’s economy to several factors, including the state’s “aggressive move toward rebuilding its economy through resurrecting vital industries, attracting businesses and creating jobs.”
Brodeur added, “Our economic success attracts business travelers and tourists alike. More professionals are visiting the state for work, and tourists love to experience Rhode Island’s beauty and environment.”
Rhode Island’s location is another reason why the state’s traveler economy is growing, said Brodeur; the New England state is a short drive from Cape Cod, MA; Boston; and Connecticut.
“Each of these elements has combined to make Rhode Island’s tourism sector extremely valuable, and it’s now the state’s fifth largest industry by employees,” Brodeur said.
Another asset Rhode Island has is its size. “For example, a traveler could spend the day at one of our beautiful beaches and then make a quick, 30-minute drive to Providence to have dinner in one of the hottest culinary destinations in the country,” said Thomas Riel, VP of sales and services, Providence Warwick Convention & Visitors Bureau. “It’s very easy to plan a trip full of very different, very memorable experiences without having to endure long drives or switching hotels.”
The state’s size is alluring to not only travelers but developers, especially with various market types within Rhode Island.
“Obviously, it is a small state, but there are pockets/markets that are attractive to developers,” said J.P. Ford, SVP and director of business development at Lodging Econometrics. “Providence is one because it is the state capital and the financial center of the state, and it has seen a resurgence in the last 15 years, especially in the downtown area with significant new development and activities. It is also home to some nationally recognized colleges and universities, which are strong demand generators, and Federal Hill, one of the great dining destinations in New England.”
There are currently seven hotels in Rhode Island’s overall development pipeline, totaling more than $140 million of investment in the state, according to the Rhode Island Commerce Corporation. At the moment, the projects in the state’s development pipeline vary in size, from boutique hotels to larger chains.
“This includes Newport’s $28-million Hammett’s Wharf Hotel, which broke ground in October, and the $23.8-million Hyatt Place in Warwick, which opened in June and is conveniently located near the expanding T.F. Green Airport,” Brodeur said. “These new hotels will create more than 400 construction jobs and add millions to the Rhode Island economy during their development and beyond. Developers have also been able to utilize financial tools, such as the Rebuild Rhode Island Tax Credit and Tax Increment Financing, to help fill financing gaps and get promising projects off the ground.”
Rhode Island faces many of the same development challenges as the rest of the country, including limited labor resources and rising costs for construction materials, but then, there are regional obstacles, too. “Another struggle, particular to the New England region, can be the prolonged approval process,” Ford said. “Also, with Rhode Island being a smaller state, developers face the challenge of finding the right location and being able to develop the right brand that will flourish in that location.”
Other challenges have less to do with hotel development and more to do with marketing the state’s tourism.
“Due to the varied types of hotels coming into the area, we know we need to be marketing to different customer groups all at the same time,” Riel said. “For example, the Rhode Island Sports Commission, a division of the Providence Warwick CVB, can help fill the extended-stay/suites hotels with sports teams and youth sport competitions. Simultaneously, our leisure focus will be directed at the young traveler seeking authentic experiences, which will match the demographic of some of the new boutique hotels.”
Of course, being the state’s capital, Providence, also the most populous city in Rhode Island, is a city where filling beds isn’t a problem—and it hasn’t been for years. “Providence has enjoyed hotel occupancy rates higher than the national average for the past couple of years,” he said. “In fact, during July, August and September, the city is pretty much sold out about four nights per week due to the combination of our strong group base and our leisure transient demand. New inventory in the city will allow us to displace few guests who, in the past, have been squeezed out or have stayed in suburban areas.”
Unlike ever before, the city is undergoing changes—and the results are evident. “Providence is going through a transformation right now,” he said. “Corporate occupancy in the downtown areas has grown significantly in the past couple of years, and downtown housing is basically full. In addition, Providence is a college town. The seven universities located here help drive a tremendous amount of business, both group and transient, into the hotels. In Providence, we are seeing hotel development as part of an overall pattern of growth and development in the city. I think as long as we continue to grow as an attractive, easy-to-get-to, affordable destination, hotel development companies will look favorably at our area.”
As far as the state as a whole, the forecast for the year ahead is positive. “We feel the outlook for the state as a whole is quite bright for 2019,” Ford said. “Demand should remain strong. We expect 2019 to be as good as 2018, even given the new-construction pipeline in the state.”
“Four hotels are expected to open in Rhode Island in 2019, which will result in a 2.6% increase in new supply in the state,” he said. “Two in downtown Providence, one smaller one northwest of the city and one smaller one in the southern part of the state. Three large hotels are currently undergoing major renovations—two in Providence, one in Warwick.” HB