Good morning, Council President Clarke and distinguished Councilmembers. My name is Sean Clancy. I'm the General Manager at the Loews Philadelphia Hotel, and I want to thank you for the opportunity to speak on behalf of the concerned hotel owners of Philadelphia.
Our coalition members are deeply concerned over the City's plan to create a Headquarters Hotel Tax Increment Financing District for the construction of a 700-room hotel at 1441 Chestnut Street. As we've expressed in a letter we sent to each of you on October 28th, we appreciate that you've been true partners in the success of the hospitality industry here in Philadelphia. We recognize that these proposed efforts to subsidize the development of a W in an element hotel are intended to build business at the Pennsylvania Convention Center. We too are supportive of that goal, but respectfully, at this time, it's the wrong time and the wrong project.
Philadelphia's downtown hotel market is not strong enough to support and absorb another 700 rooms on top of what's already planned without cannibalizing business from existing properties. Occupancy is projected to drop from 73.4 percent in 2012 to 67.6 percent by 2017. That's a 6 percent decline in our industry. Philadelphia's occupancy numbers already sit below those of other major East Coast markets.
The current climate just doesn't warrant the additional rooms. In fact, after adjusting for reductions at other hotel properties, the proposed project will not generate nearly the amount of tax increments or jobs that the developers claim, and the City may very well end up giving away more money in subsidies than it receives in additional taxes.
Headquarter hotels in Baltimore, Sacramento, and St. Louis received varying amounts of public subsidies. They vastly underperformed their projections, lost money, and became a financial drain on the city and had an adverse impact on room rates at other downtown hotels. Each case was different, but the result was the same. Providing major subsidies for large headquarter hotels that don't pencil on their own has not worked out well in several other hotel markets. Let's not make the same mistake here in Philadelphia.
Thank you, members of Council, for your time this morning.