As hotel market fills out, Springwood starting on new hotel in Derry Township
A York County hotel developer is starting on a new project in the Hershey area even as the hotel construction boom shows signs it could be slowing down in Central Pennsylvania.
Derry Township supervisors on Tuesday approved plans by York Township-based Springwood Hospitality to build a new Tru by Hilton hotel on a former bakery site on Hillcrest Road, which is on the west end of Hershey.
Springwood CEO David Hogg said his company plans to break ground next week on the five-story, 112-room hotel, which should take about a year to build.
Tru is more of an entry-level hotel for Hilton. Rooms cost about $100 per night and the hotel is designed to attract younger millennial travelers, but with a price point and amenities that might appeal to older travelers as well.
While Hogg is happy to start on the Tru project — one of several active sites for Springwood in Central Pennsylvania — he admits it is getting harder to develop hotels locally.
The York County company is among a handful of developers that has been busy building new hotels in Central Pennsylvania over the last two or three years as the economy has improved. The last development boom in hospitality was before the recession.
But land is getting scarce, construction costs are rising and a tighter labor market is making it harder to find staff to run hotels. The labor shortage is pushing up wages and benefits, which is squeezing profit margins for hotel developers.
"The market controls the price of room nights. Wages impact our margins," he said. "It makes it more difficult to develop looking forward."
However, high net-worth investors are increasingly interested in real estate projects, especially hotels, because they offer diversification out of the stock market and provide consistent cash flow each year.
To satisfy that investor appetite, Springwood is looking to expand into the Lehigh Valley and push deeper into Maryland for projects. The company has a second hotel opening this summer in Frederick, Maryland.
Hogg also cited Delaware and New Jersey as possible expansion markets for his company.
"We're always looking to make a match work," he said.
Hotel development also could continue in growing areas of Central Pennsylvania such as Cumberland County.
Other developers have said they see potential projects built near mini-casinos. There are three casino projects slated for the region: in the Cumberland/Franklin area, in York County and in the Lancaster/Berks area.
Many of the new hotels that have been built in Central Pennsylvania are all-suite hotels that cater to corporate travelers staying for multiple days, and hotels with limited food-service operations and little meeting space. The construction also is bringing in new brands developed by hotel chains such as Hilton and Marriott, which are looking to introduce their latest brands to smaller markets.
Tru and Home2 Suites are the newest Hilton concepts that have been expanding rapidly, while Marriott has been adding new Courtyard and Fairfield Inn & Suites hotels.
Springwood helped bring both new Hilton brands to Central Pennsylvania. The company was just recognized by Hilton for its Lancaster County Tru, which Hilton named its new build of the year for Tru in 2017.
"I think it's reflective of the relationship we have with Hilton," Hogg said.
In addition to building Tru and Home2 hotels, Springwood has built Homewood Suites and Hampton Inn & Suites for Hilton.
And his company is not planning to slow down.
The Hershey Tru project gets underway as Springwood prepares to start construction on a Home2 at Progress Avenue between Valley Road and Brindle Drive in Susquehanna Township, just in front of the Shoppes at Susquehanna Marketplace.
The hospitality company also is wrapping up construction of a Home2 at the Shoppes at Belmont in Manheim Township, Lancaster County, which is slated to open in August, and it is preparing to start construction later this summer on a hotel that will combine the Tru and Home2 brands in Northampton County.
When it opens, the Belmont Home2 will be Springwood's 11th active hotel .
Hogg said his company will remain opportunistic and continue to build hotels in Central Pennsylvania, if the right sites emerge.
Springwood is interested in bringing new brands to market for both Hilton and Marriott, which could include redeveloping old sites in urban areas. Hogg also would love to round out his company's portfolio with existing brands, including Residence Inn and Courtyard, both Marriott hotels.
"We're always looking, but there are not very many brands you can do and there are not many locations where it makes sense," he said.