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St. Pete is one of the country’s hottest new hotel markets. Here’s why.

By January 7, 2020Articles

St. Pete is one of the country’s hottest new hotel markets. Here’s why.

There will be demand for the hundreds of planned hotel rooms.

The Sunshine City is in the midst of an unprecedented hotel boom. In the past year, developers have announced plans for more than 1,000 new hotel rooms in and around downtown St. Petersburg. Two projects are well underway —the 132-room Tru by Hilton on Central Avenue and the 92-room Galaxy near the Sundial entertainment center. And there’s talk that a big new Marriott is planned for a long-vacant lot next to the Duke Energy building in the heart of downtown. The global medical tourism industry is booming, with as much as $72 billion spent on medical-related travel in 2018. The segment is expected to increase by 25% each year for the foreseeable future. By 2025, the global medical tourism industry is expected to be valued in excess of $160 billion. With cities across the world already actively attracting this demand segment, there are many opportunities for hotel developers to take advantage of this trend, especially in venues with well-known medical centers lining their path.

Can an area that lacks a convention center and is miles from the gulf beaches support so many new hotels? For answers to that and a look at how the hotel industry is changing, we turned to an expert — Lou Plasencia, CEO of The Plasencia Group, a Tampa-based hospitality sales and consulting firm with offices across the country.

It seems like every St. Pete project announced these days involves a hotel. Why is everyone so big on hotels?
There’s a variety of factors leading to all of the interest in downtown St. Pete. One I think was the sale of the Vinoy at a very attractive price. ($188.5 million in 2018). That put the area on the map in terms of the valuation that an asset like that would get. That was pretty much the first bottle rocket to go up. It was a little over $500,000 a key, one of the highest in the Tampa Bay region in the last 10 years. That really opened people’s eyes and then you started to get people at these investor conferences and lodging conferences who were noticing that the Tampa Bay region has consistently had among the highest RevPAR numbers in the country (Revenue Per Available Room).

What other factors?
There is for all intents and purposes a dearth of high quality product in the downtown St. Pete market. That attracted a lot of developers that are looking for niche markets, hidden markets that have a lot of potential. St. Pete is one of those markets where there’s not a whole lot of supply and there’s a tremendous amount of demand, in particular leisure demand, and land is still relatively inexpensive compared to other markets like Austin, Nashville and Charleston.

Anything else that attracted them?
When these people came to look at St. Pete, they found it’s an extremely walkable, extremely compact market and that the amenity base offered by downtown St. Pete is unmatched. There are probably just three or four markets in the country as walkable — La Jolla or Charleston or Napa or Savannah. You start on the south end with the Dalí (museum), and work your way up north and end with the Museum of Fine Arts. That’s just the museums. Then you’ve got the Mahaffey, a little of everything on Central, everything in the Edge District that’s going up there, that makes it a very attractive venue that appeals to pretty much every generation from the boomers to the Gen Z-ers.

Speaking of the Edge District, why are so many hotels planned for that area?
What has happened in the last five years in particular is a proliferation of lifestyle brand and boutique hotels. What is lifestyle? It is less ballroom and more fun room, more aligned with the local community. It’s bringing in local chefs, parking themselves next to an array of restaurants already existing. There’s very little meeting space, a lot more communal space, a high-energy lounge or in some cases a rooftop lounge, and that space is attracting that 25- to 45-year old clientele.

But can they really fill up so many rooms?
Yes, there is a huge demand for that client even if there is no convention business in town, even if there is no convention center. Those hotels, the lifestyle and boutiques, are catering almost exclusively to an experiential stay. In other words they want it to be memorable. Twenty years ago, every hotel brand was trying to create cookie-cutter hotels so a customer who walked into a Marriott in Poughkeepsie on Thursday would know exactly where the alarm clock and lamp were when they woke up in Omaha the next Monday. That has totally flipped on its end, and what appeals to the masses now is unique memories.

But don’t most people who come to Florida want to go to the beach or Disney? Is there enough to keep them occupied in downtown St. Pete?
I think people will park themselves in downtown St. Pete for three or four days. They’ll hit the beach for a day, they will go over to the Pier and pick up a wave runner or paddle board and do the bay on another day. They’ll do the museums on the third day, and they’ll do the craft breweries and restaurants on the fourth day. There is a plethora of experiences that these properties are marketing.

The Galaxy, which is nearing completion across the street from Sundial, is sort of a cool-looking place. Can independent hotels like that do okay in this market?
Given its location, I think it will do well. It’s not a huge hotel so it should fill up, particularly on weekends. You look at the Birchwood (on Beach Drive). That does extremely well with wedding and leisure travelers, it’s very busy on weekends. Mid-week, it does bring in some of the corporate crowd so that people that are working over in Carillon at one of the financial services firms or working even in downtown Tampa will commute to downtown St. Pete and stay just for the experience they have after work.

Any other hotels you think might be on the drawing boards?
Something else to focus on is the brands not here yet. If they can find the land and build, the market is extremely ripe for several brands not existing in downtown St. Pete. There is no Westin, no JW Marriott and no full-service Marriott. There is no Intercontinental, no Waldorf Astoria, no Hyatt Regency.

Over the next five to 10 years hopefully you’ll see a lot more full-service hotel development. Depending on what happens with the Tropicana Field site, which I believe is an ideal location for a major exhibition and convention center, I think you will eventually see a very big convention facility.

This article appeared in theTampa Bay Times on January 7, 2020.