In 2004, Brittany Danahy was enchanted by summertime at Delaware’s beaches.
That July, she and her husband visited from California to watch the Rehoboth Beach lifeguard competition on the sands, and enjoyed the tangy, slightly sweet sauce on a slice from Grotto Pizza. She loved it so much, the newlyweds moved to Rehoboth Beach in October.
“Then, it was like nothing was open. Honestly, it was like a blinking light town,” said Danahy, who is a commercial real estate agent with
DSM Commercial. “Luckily, it’s an area where you can jump and go to D.C., New York or Philadelphia.”
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Before Memorial Day, Rehoboth Beach is quieter than seen in the summer months. But with the growth of the so-called summer season, it's been attracting strong numbers throughout the year. | DBT PHOTO BY KATIE TABELING[/caption]
When the San Diego native moved to Rehoboth Beach, it was already well-established as the “Nation’s Summer Capital,” with visitors from a two-hour radius booking hotels or planning trips to their vacation homes. Most of them left the summer town once the sea breeze blew a little cooler.
Today, it’s a different story. The ZIP code 19971, which covers Dewey Beach, Rehoboth Beach, North Shores and Henlopen Acres, has a population of 15,528, steadily growing over the past 10 years. The Cape Henlopen School District, which serves that area, has seen
student enrollment rise by 43% in the last 15 years. And tourism continues to be big business, with
record-setting visitor numbers.
Five years since the start of the COVID-19 pandemic, the resort community is seeing unprecedented commercial development and redevelopment to meet the insatiable demand.
Economy of summer tradition
Rehoboth Beach is a small town with large icons: the
former neon orange Dolle’s sign, which loomed over the millions who walked the boardwalk until 2022, the Grotto Pizza stores flanking the bandstand on both sides of the boards.
Turn south and visitors can find the amusement rides and Skee-Ball at Funland, which has been in business since 1962. It’s a few steps away from
Zelky’s Beach Arcade, which opened in the 1980s under a sign branded with pastel pink and with an elephant mascot.
On Rehoboth Avenue, there’s a series of small boutiques that have been in business for years, and it’s rare to see some of the businesses come and go. Commercial leases in prime downtown are listed around
$40 per square foot for small spaces, and moving out to west Rehoboth sees leases drop roughly by half.
Take the deal for
Black Dog, a high-end lifestyle brand that started in Martha’s Vineyard, Massachusetts. Danahy recently signed the retailer to take residence at 146 Rehoboth Ave, a 4,800 square-foot space two blocks from the beach. The real estate agent said that Black Dog wouldn't likely come if they did not see the same customer demographics in Rehoboth as they do in major cities on the East Coast.
“They’re looking up and down the Eastern Seaboard and they say, ‘OK, I’ve heard of Rehoboth. I want to be there.’ I feel like we’re definitely out there as an up-and-coming higher-end beach clientele that would frequent a store like that,” Danahy said. “A year or two after COVID, we’re definitely on the short list for these companies.”
There’s plenty of young professionals and retirees from Washington D.C., Baltimore, New York and New Jersey who dreamed of beach life and have since moved here. Bright MLS reports that condominium prices in the 19971 ZIP code are now $710,000, a 111% increase from where they were a decade ago.
Tourism is booming as Rehoboth Beach collected $1.5 million in hotel tax between April 2024 and March 2025, and $3.8 million in short-term rentals in the same period. On any Saturday between June and August, 3,500 hotel rooms are
booked per week, according to the Rehoboth Beach-Dewey Beach Chamber of Commerce. And the market is quickly working to answer the demand for high-end services, particularly in hotels.
“This is a relatively high-end destination—it’s not a discount destination—and you’re seeing a lot of travelers who have either discretionary income coming from New York and D.C.,” Southern Tourism Executive Director Scott Thomas said. “You have all those market forces at work, and what you’re seeing is there’s a move to the niche market in downtown Rehoboth against something that’s pretty powerful: nostalgia.”
Boutique hotel boom
Ten hotels have been recently opened or are in the pipeline for Rehoboth Beach, and several are planned to dramatically reshape the boardwalk skyline from the 1970s architecture. Two of them are on prime spots: 1 and 2 Rehoboth Ave., overlooking the bandstand.
The former Dolle’s Candyland moved from 1 Rehoboth Ave., and after Grotto Pizza and Onix Group bought it years ago, plans started for a Grotto Pizza with
a boutique-style hotel on the second floor. Demolition has already started, with plans to open and have other tenants like Zelky’s and Kohr Brothers Ice Cream in expanded or improved spaces.
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One Rehoboth Avenue stands to be reimagined as one of the key boutique hotels along the boards, once it opens. | DBT PHOTO BY KATIE TABELING[/caption]
Jeff Gosnear, president of Grotto Pizza, said One Rehoboth Hotel will target the mid-Atlantic region traveler “looking for a finer resort.” The 60-room hotel was determined by the parking but also what best suited the town.
It will likely be soft-branded, meaning it will be associated with a national chain but operate under its own identity. TKo Hospitality had the same approach when it turned the 1980s-era Sandcastle Motel into
Coast Rehoboth Beach in 2023—in contrast to the Hyatt Place the group opened two years earlier.
“We didn't believe a mega-room hotel was appropriate for the town. Instead, we tried to design a project that would enhance the area, not detract from it,” Gosnear wrote in an email to DBT. “Being oceanfront and directly on the boardwalk lends itself very well to a hotel operation.”
On the other side of the boardwalk, the Papajohn family received approval for a 92-room hotel last summer with retail on the ground level. In the 1930s, the family ran a Victorian-style hotel there. The future hotel will see that look return where now a Candy Kitchen and The Ice Cream Store stand today.
Off the boardwalk, there’s two other boutique-style hotels under city review. Gene Lankford, co-founder of Ocean Atlantic Company and owner of the Atlantic Sands, is looking to build a 55-room hotel on Baltimore Avenue. Plans for another hotel at the corner of Rehoboth Avenue and Third Street were
also under consideration.
“Clearly these developers are very optimistic. Otherwise, they wouldn’t be building them,” Rehoboth Beach-Dewey Beach Chamber of Commerce CEO Carol Everhart said. “If all these go through, there’s more opportunity for businesses at all levels, because they need customers.”
Besides, Everhart said, there’s more name-brand hotels that have been built in West Rehoboth in the past few years—and a new style of hotel doesn’t change Rehoboth Beach’s identity. She said she sat in on a recent city Comprehensive Planning meeting, where a committee member coined the phrase “yesterday’s charm with today’s amenities.”
“There’s something for everyone. Whether they want the high end or the middle, you got it. It’s not just the beach; it’s an opportunity for everybody to find something they hope to have on their vacation--whether you want a French fry or a fancy drink,” she said.
The Rehoboth Renaissance
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Avenue Inn General Manager Michael Hayes, left, and Seaboard Hospitality CEO Alex Lombardo stand in front of one of the "true" boutique hotels in Rehoboth Beach.| DBT PHOTO BY KATIE TABELING[/caption]
Alex Lombardo, the CEO of
Seaboard Hospitality, has a longer-range view of the changes in Rehoboth Beach. Seaboard manages the
Avenue Inn, an independent hotel that’s reinvented itself thrice over, and Lombardo is a career leisure executive, including roles at Great Wolf Lodge.
“When we went through the Great Recession at Great Wolf, we were 100% dependent on families and those who drive to you. What I think we’re seeing is that the staycation market is strong when economic times are more difficult. Your customer demographic may change, but overall, its occupancy is the key metric. And it stays strong because people want to pile into the car and drive two hours for a quality vacation.”
As the market trends more upscale, for a time at least, Avenue Inn continues to see the New York and New Jersey market, look at its website and consider booking a room for at least $149 a night, complete with access to a steam room and a pool as well as complimentary wine and cheese. Demand for rooms is still on pace from the year before, with visitors ranging from families to couples.
Thomas, who is the chief marketer for Sussex County, sees the changing tide in the hotel offerings cater to the new swell of urban visitors while continuing to offer cross-generational appeal.”
“You have all these businesses coming here because they have great memories of Rehoboth Beach because of mainstays like Funland, but then you have projects like the Belhaven that want to pay homage to the history while offering upscale amenities,” he said. “That’s going to be a big part of the renaissance moving forward.”
