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The Hunt For The Next Portland: Hoteliers Bet Big On Small City America

From El Paso to Pittsburgh, cities once considered “drive-through” are undergoing a rebirth, with chic new hotels strengthening local tourism and culture.

The Hunt For The Next Portland: Hoteliers Bet Big On Small City America
A century-old former YMCA building is now the Ace Hotel Pittsburgh in East Liberty, a neighborhood referred to as the “second downtown.” [Photo: courtesy of Ace Hotels]

On a corner in downtown El Paso, a sleek steel structure stands out on an avenue of warehouse complexes. The newly refurbished 50-year-old building rises above the dramatic red mountain skyline and a busy highway intersection that leads to Juarez, Mexico.

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It’s home to the Hotel Indigo, a new boutique inn whose industrial chic decor captures the region’s past and future: Cement floors and walls contrast with Southwestern-flavored cacti, adobe vases, and tapestries. The hotel opened last year as part of a larger experiment. If you plant a cool place in a deserted downtown, will the area bloom?

The answer appears to be yes. The Indigo has helped usher in a new era for the strip, which was once a vibrant commercial hub. In the last two years, the neighborhood has become flush with art galleries, restaurants, cocktail bars, and a new baseball stadium. Three other hotels (including a Starwood) are moving in, and there are plans to build a trolley to shuttle visitors to and from the University of Texas, El Paso.

The 12-story Hotel Indigo in downtown El Paso has helped reinvigorate the area. [Photo: courtesy of Hotel Indigo]
Miguel Diaz, the Indigo’s general manger, was confident the hotel would contribute to the area’s revitalization. “There was enough data out there for us to say, ‘This is going to be a domino effect, it’s gonna multiply,'” he says. “It’s not a goal anymore. It’s happening.”

The pattern is becoming familiar across the country, as hotel operators hedge their bets on up-and-coming, midsize cities. Some are already cultural hubs, others are moving in that direction. Hospitality companies are setting their sights on downtowns across the country, continuing a revival of the local city square that’s been ongoing for years. From Detroit and Milwaukee to Asbury Park and Pittsburg, investors are scrutinizing the cities’ profiles, looking for economic growth, young demographics, and a sustainable arts culture. They’re searching for what appeals to the millennial market–“the next Portland,” a once ignored place that, with the right new businesses, can become an edgy-cool destination. Over the past few years in Savannah, Georgia, alone, nearly a dozen new hotels have set up shop.

Interest in smaller markets is paying off, according to Yan Freitag, SVP of the travel industry consulting firm STR. “The growth rates are pretty staggering, but that’s because it [started] at zero.”

Compared to so-called first-tier cities, land in these areas is relatively cheap, so boutique owners can purchase and refurbish old buildings that have character and history and are cherished by the local community. In many instances, these buildings cannot sustain big hotel chains, which require a certain footprint or amenities like elevators.

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Booking.com reports a “substantial” increase in boutique stays in smaller American cities over the last year. In terms of hotel room booking popularity rankings, Milwaukee jumped from 111 to 101, Cleveland from 120 to 86, and Cincinnati from 221 to 210. While these might not sound like monumental increases, they show promising growth for cities outside of America’s top 20. Savannah, Pensacola, Memphis, Charleston, and Little Rock also experienced more than a 10% increase in tourism compared to the previous five years. 

In these areas, you’ll find boutique hotels—which have seen a 5% annual growth in the last five years—as well as established chains masquerading as small through their soft brands, such as Marriott’s Autograph Collection, Choice’s Ascend Collection, or Hilton’s Tapestry. Autograph is in the middle of revamping a 109-year-old athletic club into a 167-room hotel in Pittsburgh. El Paso’s Hotel Indigo is part of the InterContinental Hotels Group, parent company to the Holiday Inn and Crowne Plaza. Everyone wants in on the trend.

Boutique and big brands take various routes to capitalize on these less-flashy areas. Some come to court consumers who prefer midsize cities, while others want to be part of the ongoing revitalization–and get travelers excited about the areas. Some are trying to encourage an arts culture, while others strive to highlight the city’s traditions and history.

Regardless of the path, one thing is clear: There’s big money in small(er) America.

The Ace Hotel Pittsburgh hosts business and cultural events. [Photo: courtesy of The Ace Hotel]

Follow The Art

It was a only decade ago that actress Sienna Miller requested “pity” from the public while shooting a movie in Pittsburgh, which she called “Shitsburgh.” But in 2016, the western Pennsylvania town that gave us such national treasures as the Klondike Bar and Jeff Goldblum jumped from 103 to 77 in Booking.com rankings of hotel room bookings and is now, at least according to Travel + Leisure and Vogue, one of our nation’s hippest cities. That’s thanks in large part to a vibrant art community. The Steel City’s abandoned industrial complexes have been transformed into art galleries and condo lofts, while delis made way for vegan diners. Zagat named it America’s no. 1 food city in 2015.

The Ace Hotel put a stake in the Pittsburgh ground in late 2015. The design-centric hospitality group made its home in a century-old former YMCA building in East Liberty, a neighborhood in transition that’s referred to as “second downtown.” Just over a year later, it hosts fashion shows, local business workshops, artist lectures, and even post-church brunch.

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Explaining the decision to pursue Pittsburgh, Ace Hotel partner and chief brand officer Kelly Sawdon says, “It was a gut feeling, mostly. It’s a part of the city on the rise [culturally], with a dynamic creative class and a solid sense of its history.” Also helpful, says Sawdon, was that it was home to designer clothing shops, innovative restaurants, art galleries, and what she describes as “a really tight-knit community of thinkers, builders, artists, and entrepreneurs.”

21c Museum Hotels refurbished a former an auto plant in downtown Oklahoma City.

Art is also a central factor for the 21c Museum Hotel, which renovated a former Ford Motor Company Model T assembly plant in downtown Oklahoma City last year. All properties in the upscale chain showcase artwork and sculptures—even in the bathrooms. The company specializes in refurbishing old buildings with help from community organizers and local arts groups. Through art, the group hopes, the hotel will attract cultured travelers to the area who are looking for an unorthodox trip.

In 2012, 21C Museum Hotels ventured into downtown Cincinnati, where the company purchased the Metropol Hotel, a majestic historic building that in the last decade made more calls to police to report crimes in the vicinity than any other address in downtown Cincinnati. The properties are also found in Durham, North Carolina, Nashville, Tennessee, Lexington, Kentucky, and soon Kansas City, Missouri.

21c Museum Hotels renovated a historic downtown Cincinnati hotel that had been in decay.

While he did not provide a specific number, 21c’s president Craig Greenburg says millennials make up a “big” portion of the chain’s client base because, he explains, they’re looking for an experience that feels “authentically American,” which can mean anything from a slice of apple pie to a denim factory tour. The idea is that big cities don’t feel “American” enough to some young travelers. Like their food choices, they want to “go local.”

Maybe that sense of “authenticity” has to do with these up-and-coming cities having their own identities. “You often hear people talking about how their city is going to be the next Portland,” Greenburg continues. “We’re interested in cities that want to be even better versions of their current selves.”

Eat, Drink & Break Ground

Speaking of Oregon’s top hipster city, Bashar Wali knows it well. Wali is the president of Provenance Hotels, which began in Portland and has six properties there. The chain has now expanded to Nashville, New Orleans, Madison, and, most recently, Milwaukee. The company is converting an 80,000-square-foot Milwaukee Masonic Center in built in 1912 into a 220-room hotel and restaurant. The building cost $4 million—which buys you a nice apartment in Manhattan.

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Milwaukee, with its friendly breweries, love of motorcycles, and chef-inspired restaurants, saw a 3.5% increase in visitor spending last year and a 4% increase in total tourism sales in 2015, according to the latest Economic Impact of Tourism in Wisconsin report. It’s also experiencing its largest construction boom since the 1960s, with riverwalks, museums, and lakefront condos in the works. For Wali, the city meets Provenance’s criteria for investment: a place that reflects “a nugget of desire for doing really creative things. There needs to be a movement in the city.”

Wali says his properties see a lot of “anti-establishment” foodie millennials who seek under-the-radar areas that haven’t been displayed on their Instagram feed. They want to be first.

“The mind-set is: I want to discover something you don’t know so that I can have the social currency of bragging about it and telling you that I was an early adopter,” says Wali. That mentality lends itself to a different kind of destination promotion, one in which hoteliers advocate the uniqueness of their area’s experiences.

“Instead of fighting our way into Manhattan or South Beach or Hollywood, why not go into these markets where the product will stand out by its design and thoughtfulness?” Wali says.

The Schofield Hotel in downtown Cleveland, which has enjoyed an 18% spike in tourism since 2011. [Photo: Whit Preston]

Work The National Spotlight

It’s not just the creative class pushing cities into the TripAdvisor spotlight. Cleveland saw tremendous travel growth in the last year due to local government support and two major events: the city’s Cavaliers winning the NBA Championship in June 2016, and the Republican National Convention, which took place in Cleveland in July 2016.

But even before that, the Ohio city has been on an upward trajectory for the last few years. From 2011 to 2015, Cleveland saw 2.7 million more visitors, an 18% increase in visitor volume, reports Destination Cleveland, the city’s tourism arm. Additionally, nearly 66,000 people worked in tourism-related jobs—up from 60,900 in 2011.

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“For a long time, we were one of the best kept secrets in the Midwest,” says Emily Lauer, senior director of communications for Destination Cleveland.

Cleveland had a “communication gap, not a product gap,” Lauer says, noting that people misunderstood the city’s offerings. They didn’t associate Cleveland with world-class museums, celebrity chef restaurants, or artisanal bars—all of which, she says, the city has in spades. “We needed to evolve that perception of Cleveland to what we call ‘sophisticated grit.'”

In 2014, the city embarked on an ambitious promotional campaign lauding its orchestra and eateries that “you can enjoy in jeans and a blazer,” Lauer says. The marketing was meant to convey a wealth of offerings that all have a laid-back attitude. “It’s not pretentious.”

The campaign was a hit with millennials, who, according to Destination Cleveland’s research, specifically crave culinary and sports experiences.

In 2017, the Kimpton group opened the Schofield Hotel in downtown Cleveland, its first Ohio property. [Photo: Whit Preston]
More hotels are looking to putting down roots in town. This year, Kimpton opened its very first property in Ohio, the Schofield Hotel. It lives in a renovated landmark building downtown that was built in 1902 by prominent Cleveland architect Levi Scofield. In a nod to the the city’s growing music scene, there’s a complimentary guitar loaner program for what the hotel website calls “jam sessions in your very own room.”

“This is a city that is growing and there’s more of a reason to come here now,” says Adam Gurgiolo, general manager of the the Schofield Hotel. “We’re marketing towards being a destination city, not just a business city or drive-through city.”

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Enjoy Long-term Growth?

They’re certainly no longer drive-through cities, but can they become bona fide destination cities on par with Portland? What happens once Cleveland fills up the millennials’ Instagram feeds and it’s no longer a hot discovery? Where will they go next? Suburbia?

Rick Cole, city manager of Santa Monica, California, doesn’t consider the rebuilding of downtowns a passing fad. Post-industrial cities ended because certain industries moved out, he says, but today’s booming economies, including tech, are thriving. He points to Venice Beach, California, a formerly graffiti-covered and crime-ridden neighborhood that has since become known as the upscale Silicon Beach, home to more than 500 tech startups. As long as those companies flourish, so will the neighborhoods.

“Today’s industries, because they’re smaller scale, require people to be around each other,” says Cole. “The reality is that today’s creative class likes coffee and brunch, and more significantly, likes be around like-minded people.”

Hoteliers, likewise, believe in a future beyond New York or Los Angeles. Boutique and big brands alike see the value of getting a foot in the door before small towns grow into modern-day Austin. And there’s something to be said about being the top dog on a smaller circuit.

“I want to be in Manhattan like everybody else, but at what cost?” says Provenance Hotels’ Wali. “I can do a lot more creative good work in other cities.”