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Travelers will dish out more cash as Portland room rates rise

by: TRIBUNE PHOTO: JAIME VALDEZ - Portland downtown hotel room rates are rising about 10 percent this year, and a lot of new business is coming from China. Here, Chris Erickson, general manager at Heathman Hotel, stands by a table displaying the hotel's Chinese welcome package which puts Tsingtao beer alongside Oregon pinot noir.Portlanders expecting out-of-town visitors this summer should prepare themselves for a little grousing about the hotel rates family and friends are going to encounter. And they might want to tell those visitors to book quickly — Portland’s summertime hotel vacancy rate is expected to be among the lowest in the country this year.

One more bit of advice. August might be an easier month to score a downtown hotel room than July this year, with the city expecting five major conventions in July but only three, one less than last year, in August.

Downtown hotel room rates so far this year are up 11 percent over the first quarter of last year. Occupancy was at 72 percent, up 5 percent over last year’s first three months — and January, February and March have never been the busy tourist season in Portland. Overall in 2013, Portland’s 42 central city hotels averaged 79 percent occupancy.

“I used to phrase it as perhaps Portland was a cheap date,” says Chris Erickson, general manager of the downtown Heathman Hotel. “For many years we were very inexpensive compared to many West Coast cities.”

Not anymore. Portland’s hotel rates have been climbing for the last three years, according to

Erickson. Data from the industry’s Smith Travel Research shows that downtown Portland rates are finally approaching the room rates for Seattle, Denver and other western cities, though San Francisco and Austin, Texas, remain exceptions with sky-high rates.

Portland’s average daily rate for downtown hotels in the first three months of this year was $137. Seattle’s rate was $146. Austin came in at $211 a night and San Francisco downtown rooms averaged $219.

Erickson says that May through October his hotel rooms will be more than 90 percent occupied, and he expects the same is true of his central city competitors. That, despite the fact that the Heathman’s rates will rise about 10 percent across the board, after a similar price hike last year. Hotel revenue, which took a dive during the recession, has recovered to pre-recession levels, says Erickson, who also serves on the state tourism commission and on the commission that oversees the Oregon Convention Center.

Portland has become more of a worldwide destination, according to Erickson. The single largest percentage of international tourists still comes from Canada, but the numbers of Chinese visitors are growing “exponentially,” Erickson says. The Heathman has a separate Mandarin page on its website so visitors from China can easily book rooms, and those who do receive special Chinese welcome packages upon arrival. The packages feature Tsingtao beer, Chinese candies and rice porridge, alongside local specialties such as a bottle of Oregon pinot noir.

Portland hotels always have had higher than average occupancy rates, says Brian McCartin, executive vice president of convention and tourism sales for Travel Portland. Some cities, McCartin says, feature higher room rates and lower occupancy, but that’s never been the strategy here.

Another reason for the high occupancy rate in Portland, McCartin says, is the lack of new hotels, even as Portland has become a more popular tourist destination. Until the Residence Inn Marriott, with 223 rooms, opened in the Pearl District in April, the central city hadn’t seen a new hotel since 2009.

With downtown summertime occupancy rates last year at more than 90 percent, and an expected greater demand this summer, the idea that Portland hotels can’t fetch the rates asked in other cities has slowly eroded, according to McCartin.

“As demand has picked up, they’re feeling a little more bold in pricing their product a little more aggressively than they have in the past,” McCartin says.

Back in 1999, Portland’s downtown hotels charged an average of $108 per night. Last year the average was $143. This year it will be hard to find a room downtown during the summer for less than $150.

Of course, visitors don’t have to stay in the central city. The average daily rate for all Portland hotels in 2013 was $106.

McCartin credits some of the visitor growth to efforts that began two years ago when the city’s hotels assessed themselves a 2 percent fee that goes toward marketing Portland as a destination to outsiders.

Against a contentious political backdrop as intergovernmental agency Metro pushes for a convention center hotel with partial public financing, McCartin says Portland’s historically low room rates are a factor in the lack of new hotel construction. Given the city’s high occupancy rate, new hotels should be sprouting up organically.

McCartin says six to eight times a year he fields a call from a hotel chain interested in building a new hotel here. “They all call and go, ‘What’s driving all that occupancy out there?’” he says.

But according to McCartin, those chains soon find that construction costs in the area are high, and the only way they can finance new hotels is to charge higher room rates than are typical here. Marriott’s $50 million Pearl District hotel was financed through a federal EB-5 program that grants foreign investors green cards that can lead to citizenship if they invest in jobs-building projects in the United States. Most hotel chains don’t have that option.

“They think there’s not enough hotels, but they’ve got to know they can pencil out at the end of the day,” McCartin says. “They whine to me, ‘Why can’t we get the rates up?’”

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