Sports and entertainment giant AEG will make a $500-million expansion to its Marriott complex at L.A. Live as the demand for hotel rooms rises in downtown Los Angeles.
AEG will add 755 rooms to the popular J.W. Marriott in a new high-rise connected to the existing hotel building by a bridge over Olympic Boulevard, creating the second-largest hotel in California with 1,756 rooms.
The new rooms are expected to help fill a hotel shortage created by downtown's recent emergence as a place tourists want to visit and its status as a convention hub.
"We have reached critical mass where we are really beginning to become an urban destination like New York, Chicago, San Francisco and Boston," hospitality industry consultant Bruce Baltin of PKF Consulting said. "A lot of the demand coming downtown is discretionary."
Among the expected visitors are many Californians who have added downtown L.A. as an option for brief "getaway" vacations, he said.
Such regional visitors who may come to L.A. Live for a concert or Staples Center for a basketball game are among the overnight guests AEG hopes to attract. It will also make a bid for more convention and meeting business with additional improvements.
On the roof of the West Parking Garage now serving L.A. Live, AEG will build additional conference, banquet and ballroom space that will be connected to the existing J.W. Marriott function rooms by two bridges.
Los Angeles business leaders have said for years that more hotels are needed if downtown is to compete with other cities for conventions. San Diego has about 20,000 rooms serving its convention center, and San Francisco has nearly as many. Downtown L.A. has about 7,000 rooms.
"Additional hotel inventory, especially around the Convention Center, is critically important to our ability to attract larger conventions," said Ernest Wooden Jr., chief executive of the Los Angeles Tourism & Convention Board. "This 755-room expansion is a positive step forward to help ensure our inventory remains competitive."
The J.W. Marriott addition is to rise across Olympic from LA. Live just west of a 23-story Marriott Courtyard and Residence Inn building with 393 rooms that opened last year.
Previous plans called for AEG to sell the site to a developer who would build a 350-room Renaissance hotel. AEG decided to retain ownership of the land and fund its own, larger hotel development, said Todd Goldstein, the company's chief revenue officer.
"This gives us the chance to attract new and different conventions that haven't looked at us in the past," Goldstein said. Among the other target groups are travelers from China and South Korea who have shown growing interest in Los Angeles in recent years, he said.
Even though demand for hotel rooms is high and nightly rates are going up, it's still challenging to secure financing to build new inns, consultant Baltin said.
"Rates are rising but still not enough to justify new developments," he said. "Construction costs and land prices are rising faster."
By making the new building an expansion of the 52-story J.W. Marriott and Ritz-Carlton complex, AEG will get economies of scale and have a management team already in place, Baltin said. "That generates some efficiencies that a totally separate hotel wouldn't have."
The new 38-story tower and meeting space addition were designed by Gensler, the same architecture firm that designed L.A. Live including the original hotel complex. The J.W. Marriott addition is to stand at the northeast corner of Olympic Boulevard and Georgia Street.
It will have two levels of underground parking and street-level shops and restaurants operated separately from the hotel. The second floor will have a restaurant and lounge, a fitness center and a swimming pool with cabanas. A tunnel for staff use will pass under Olympic Boulevard.
The addition's 755 rooms would supplement the existing 878-room J.W. Marriott and connected 123-room Ritz-Carlton, creating a 1,756-room property. It would be second in size in California only to the Hilton San Francisco Union Square with 1,908 rooms.
If the city approves the project, AEG intends to start work late this year or early next year, with the rooms scheduled to be available in 2018. The project will go forward whether or not AEG builds its proposed Farmers Field football stadium next to Staples Center, the company said.
Demand for Los Angeles hotels should continue to grow for two years or so, said Newport Beach hotel investment specialist Donald Wise, co-founder of Turnbull Capital Group.
"Other markets including New York are complaining about overbuilding, but you really haven't heard about that in L.A.," he said. "L.A. is having its best decade since its founding."