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Washington Co.'s dominant area for lodging shifts from Dual Highway to Interstate 81

June 09, 2013|By ARNOLD S. PLATOU | arnoldp@herald-mail.com
  • Four of Washington County's five busiest hotels are off the Halfway Boulevard exit of Interstate 81.
By Kevin G. Gilbert / Staff Photographer

Fifteen years ago, Hagerstown’s eastern edge along Dual Highway near Interstate 70 was Washington County’s hotel hot spot, with four of its five busiest hotels.

But these days, the locations that dominate have swung to the city’s western fringe along Interstate 81, where the current king is the Hampton Inn off Maugans Avenue. All four runners-up are off I-81’s Halfway Boulevard exit five miles south.

According to The Herald-Mail’s review of revenue from the county’s hotel/motel tax, hotels in the Halfway area alone accounted for $13.2 million — more than half of the $24.9 million spent on room rentals during the first 10 months of fiscal 2013. That was the period from July 2012 through April 2013, the most recent month for which figures were available.

By comparison, travelers spent about $5.7 million renting rooms at hotels along Dual Highway during that period, the newspaper found.

Fifteen years ago, the reverse was true: The Dual Highway hotels accounted for at least $7.6 million — more than half of the $14.2 million spent overall to rent lodging countywide in fiscal 1998, and about $3.2 million was spent for rooms at Halfway-area hotels.

The figures are based on the hotel/motel tax of 6 cents per dollar that travelers spend for hotel, motel, bed and breakfast rooms, and campground cabins. The tax was 3 cents per dollar for a few years until it was increased to the 6-cent rate in 2000.

The revenue generally is considered a reliable indicator of a hotel’s activity, though room prices differ.

What caused the westward shift in hotel dominance has been driven primarily by the hotel brands that have moved into the Halfway area, said Richard V. Pellegrino, a partner in the ownership of leading hotels in both areas.

“In the past 10 years, you’ve seen two of the most popular — the Marriott brand and the Hilton brand” of hotel being built in the Halfway area, Pellegrino said. He is a partner in Falling Spring Corp., which owns the Ramada Plaza in Halfway and owned the Hampton Inn off Dual Highway until selling it last year.

Another main reason is reflected in the fact of less industrial development on the city’s eastern flank, Pellegrino said. Business travelers, drawn by development of that sort, are as much as 45 percent to 55 percent of his Ramada Plaza guests now, he said.

“What’s at the southeast end of town? And what’s on the western side? We know where Volvo is, we know where First Data is, and Phoenix Color,” he said, referring to big businesses along the city’s western edges. “Who’s on the southeast end of town? There’s not much. There used to be Pangborn.”


East and West

Fed by traffic on U.S. 40 and, since 1968, from an exit off Interstate 70, Dual Highway is the city’s eastern gateway for travelers coming over South Mountain from Frederick and Baltimore.

As such, the Dual proved to have prime frontage from early on for such hotels as the area’s long-time landmark, the Venice Inn. Started as a restaurant in 1948, the business added a motel in 1950 and by 1998, when its founders sold the property, the Venice had 220 rooms.

By 1998, the Venice as well as three other large hotels that sprung up along Dual Highway were among the county’s busiest, according to the tax records. The Venice, the Ramada Inn, the Hampton Inn and the Sheraton Four Points, in that order, were the second, third, fourth and fifth busiest.

The busiest was Howard Johnson’s hotel, a 159-room hotel that Pellegrino opened in 1985. In those years, before the Internet, it was important to even a franchise as well-known as Howard Johnson’s, for travelers on Interstate 81 to be able to see the hotel, he said.

“It is not so important today. It’s still nice, but it’s not as critical as it was in those days because people’s decision (on a hotel) was so spontaneous,” Pellegrino said. “Now, people make their reservations on the Internet. You don’t have that walk-in business.”

I-81 is “a main corridor for many, many people. Many people traveling south will take 81, as opposed to going down 70 and around (Washington) D.C.,” he said.

His decision to build the Hampton Inn along Dual Highway in 1996 was spurred by less complicated reasoning.

“There was nothing at that end of town,” Pellegrino said of the city’s eastern edge. “So that was not a matter of going to where the demand was, as it was going to where there was no competition.”

“The only competition at the time in ’96 was the old Sheraton. The Venice was more in-town,” he said. The Venice and what was the Ramada — which is now the Clarion Hotel & Conference Center — are closer in, whereas the Sheraton and the Hampton are further east on Dual Highway, closer to I-70.


Shifting emphasis

The shift in areas where hotels are concentrated has occurred in many communities, according to Francine Donachie, corporate director of sales and marketing for Bowman Hospitality, which owns two Halfway-area hotels, the Homewood Suites by Hilton and the Holiday Inn Express and Suites.

“That’s not a story exclusive to Hagerstown. I’ve worked in so many communities — Baltimore, Howard County, Frederick and other states — where we all sit around a table and discuss this,” Donachie said.

The conclusion is usually, “‘Well, that’s the old side of town, you know. Hotels were built where, in the day, the traveler was,’” she said. “So the Sheraton, when they opened, that was where the travel was coming.”

Today, the high traffic count on I-81 has become more of a magnet to hotels, Donachie said.

“In Frederick, the new side of town (where hotels are going) is where (Interstates) 70, 270 converge. Well, (at Halfway), we’re at the new side of town, where it seems like the traveler is.”

During the economic boom of 2004 to 2006, growth came to Washington County along U.S. 40 and I-70 from the east, as people from Washington, Baltimore and Frederick moved here to build houses.

Growth in travel and thus, hotel business, doesn’t necessarily follow the same path, Donachie said.

It isn’t far for someone to drive from Baltimore, where I-70 east begins, to Hagerstown, she said.

“So he may have just started his trip. They’re not really on the road long enough to stop,” she said. “So if you’re looking to build a hotel, (Dual Highway) is a good location from that (interstate) perspective, but I find that on 81, you’ve just got a ton of cars on the road.”


Highs and lows

When the Howard Johnson’s hotel in Halfway became The Plaza in fiscal 2000, the hotel retained its crown in the local lodging industry.

According to the tax records, Pellegrino’s hotel — whether as the Howard Johnson’s or as The Plaza — was the county’s busiest for at least nine years until fiscal 2007.

And, over that time, other newer hotels along I-81 began to take more of the business, pushing Dual Highway hotels out of the five busiest.

The Venice was the first. The hotel, which has changed ownership a few times since 1998, dropped to the fourth busiest in fiscal 1999 and to the eighth busiest in fiscal 2000.

By fiscal 2005, the Venice had sagged to No. 20 among the 41 places that were paying the lodging tax then.

In each of the years since then, the records show, the Venice has increased its revenue from room rentals and, thus far in 2013, it is ahead of the year-ago period. It is now the 18th busiest among the 49 places listed as paying the tax.

One of those was closed last September — years after sharing the limelight with the Venice as Dual Highway hotels that were among the county’s busiest. The hotel, most recently known as the Hagerstown Hotel & Convention Center, was the former Sheraton Four Points for many years.

Almost exclusively, since fiscal 2007, the county’s hotels along I-81 have been the industry’s busiest. The lead has switched back and forth among the Hampton Inn off Maugans Avenue, the SpringHill Suites by Marriott near Halfway Boulevard and the Homewood Suites by Hilton in Halfway.

The lone Dual Highway member of the top five from fiscal 2007 through fiscal 2011 was Pellegrino’s Hampton Inn. It dropped to sixth place in fiscal 2012 and, since it was sold to Randy and Michele Morral last summer, has remained in sixth.


Weathering the storm

The nation’s 2007-09 recession scarcely seems to have scathed the local lodging industry.

Based on the tax records, the newspaper determined that room rental revenue fell only in fiscal 2009 — July 2008 through June 2009 — when they dipped 2.7 percent to $25.8 million. In the following 12 months, revenue rose to $26.3 million, although that still was a bit below fiscal 2008’s $26.5 million.

The industry’s room revenue has risen every year since.

“It was a little bit of a rougher patch for awhile,” Pellegrino said about the hotel business during the recession.

“They were hard-fought dollars,” Donachie said.

Pellegrino said he doesn’t know why the downturn for hotels overall was so slight, compared to the shock felt in many other sectors of the local economy.

His Plaza hotel did suffer some during the recessionary years, but that was largely because it was an independent then, not affiliated with a national franchise as were the newer Halfway-area hotels, he said. The business has done much better since The Plaza became affiliated with the national Ramada chain in 2011, restructured and mounted a new sales effort, he said.

“There’s just a lot of factors that will affect each individual hotel,” he said. “We have a unique situation going from a Howard Johnson’s to a Ramada and, at the same time, you have your recession and the housing bubble burst. And at the same time, you have other properties being built in the Halfway Boulevard area.”

Meantime, the new Homewood Suites by Hilton was facing an economic challenge of its own making. It opened in November 2008, when the recession was at its worst.

Although the number of business travelers staying at the new hotel was “probably a bit less” than projected, Homewood Suites was helped by a variety of factors, Donachie said.

One was “a good run of business” from the U.S. Department of Defense, which does training and other activities in the area, and another was the business leads given area hotels by the Hagerstown-Washington County Convention and Visitors Bureau, she said.


A share of business

In all, there are about 2,500 rooms available in the county at hotels and other lodging places, according to Thomas B. Riford, president and chief executive officer of the convention and visitors bureau.

In 2010 and 2011, a research group that monitors the occupancy rates of most of those rooms here and at hotels elsewhere in the nation said there was an occupancy rate here of 49.5 percent, according to reports issued by the Maryland Office of Tourism. The reports don’t give the occupancy rate for each hotel.

In 2012, Smith Travel Research Inc. said the county’s room occupancy rate had risen to 55 percent, the state tourism office said.

Nonetheless, the county’s rate still is less than the 61 percent to nearly 62 percent rates throughout Maryland, the Washington-Maryland-Virginia-Delaware region, and nationwide.

Pellegrino, who has been concerned for years that too many hotels were coming here too fast, said the occupancy rate comparisons show the lodging market “is saturated” here.

“We have more hotel rooms than we actually can handle ... which drives down pricing,” he said. “This isn’t the time to build a hotel in Hagerstown, if you’re smart.”

But Donachie said she doesn’t agree that the market is crowded.

“There are periods and times where people seem to be swimming in the same pool for business,” she said. “I don’t think I would use the word ‘saturated.’ ‘Saturated’ gives off the impression that there are people losing just buckets of opportunity here. I think we do all share and fight for business.”


In plain sight

The Hampton Inn off Maugans Avenue, the county’s busiest hotel thus far this fiscal year, has seen a surge of business since last summer, the tax records show.

Travelers spent $2.4 million renting rooms there from July 2012 through April, the newspaper determined. That was an 8 percent gain over the same period a year ago.

Owners Randy and Michele Morral couldn’t be reached for comment last week.

Donachie said that probably one factor in why that Hampton is doing well is what seems so important to travelers who call her hotels.

“One of the questions we get all the time is, ‘When we get off the highway, will we see you?’” Donachie said.

“That Hampton Inn, coming down 81 (in Pennsylvania), you travel a good bit of time before you see a hotel,” she said. “Then, you cross over into Maryland and then, you see that Hampton Inn being right off the highway.”


‘Hanging strong’

As to what lays ahead in the economy for local hotels, Donachie and Pellegrino have seen hesitation in the business community.

“At the end of last year, I think people were optimistic (that) this year was the year we were going to make a big huge leap, this was going to be the year of recovery,” Donachie said.

Then, when the federal sequestration hit, “with the government not traveling, not awarding contracts to subcontractors, people became kind of tentative,” she said. “So they hold on. We see corporations get kind of nervous about their money. (The economy) wasn’t backsliding, but it wasn’t moving where we want it to go.

“But, thank goodness, we do a lot of business with Whitetail (ski resort), so we saw a lot of the social traveler coming in. It didn’t grow the way or how we thought it was going to grow,” she said.

Now, as the lodging industry is entering its busy summer season, “we’re going like gangbusters,” Donachie said.

In addition to the 150-year anniversaries last year and this year at area Civil War battlefields, “families are on the road now, it’s graduation time, wedding time. Our corporate business is hanging strong.”

Pellegrino said business at his Ramada Plaza hotel has been increasing this year, but the federal government’s inaction on some economic issues does raise concern.

“I see a leveling off (of business) later on this year. I think the current tax code and some of the other things in our economy aren’t going to be especially favorable in general,” he said.

“I’m not talking about anything really dramatic — either direction” in the economy, he said. “But I don’t see anything dramatic being done (to ensure) that everything is going to continue to get better.”

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