Despite at least $15 million in losses from “debt financing” problems, the Hotel Inter-Continental, San Diego’s sleek 681-room luxury waterfront hotel, is expected to end its first calender year of operation in December with an unusually high occupancy rate of 75%, hotel officials said Thursday.
Officials blamed the loss on the heavy debt involved in financing the $92-million hotel, adjacent $11-million hotel conference center and other facilities.
Although Sandor J. Stangl, the hotel’s general manager, said he didn’t know the full extent of the losses, he said revenues are “covering the operating expenses (of running the hotel) . . . but not debt financing.”
Douglas F. Manchester, whose Torrey Enterprises developed and owns the hotel, said in a telephone interview that the losses were anticipated and will continue until a 683-room expansion in an adjoining tower is completed by the end of 1987.
The reason for the debt, Manchester said, is that, along with the construction of the first tower, his company undertook the construction of various facilities, such as a seawall, restaurants, a new street and other infrastructures, which will complement the second tower and the San Diego Unified Port District’s $125-million planned convention center.
Two weeks ago, Manchester announced an agreement with Home Savings of America involving a $208-million line of credit to cover both the refinancing of the first hotel tower and financing for the $90-million second tower.
“The refinancing is to accommodate the second-tower construction,” Manchester said. “Once everything is completed . . . we’ll eliminate the negative cash flow.”
Including depreciation and debt financing, Manchester estimated losses at "$15 million or $16 million” since the inception of the hotel project.
With the addition of the second tower, the Inter-Continental will have 1,364 rooms. The added rooms are considered a key element in the success of the port district’s convention center, the proposed mid-1988 opening of which is already six months behind schedule.
Manchester said that while he is “certainly very disappointed the port district has not been able to stick to the dates,” the delay won’t have a “significant impact” on the success of the second tower, at least in the short-term.
“It will have an impact, but not a dramatic impact because we’ll still be able to use most of our meeting space,” Manchester said.
Further delays in the construction of the convention center, however, wouldn’t bode well for the hotel, Manchester maintained.
Inter-Continental’s red ink isn’t surprising, Stangl said, because his company anticipated operating the hotel at a loss during the first three years. “Hotels are mainly long-term investments,” he said.
The hotel’s operations and the status of the 683-room expansion were discussed by Stangl and other Inter-Continental officials during a press conference Thursday at the hotel.
Although there is still a full quarter remaining in the year, Stangl said the hotel’s occupancy rate in 1985 will average about 75%. Such a first-year rate, he said, is the best for any comparable hotel in the United States.
When the Inter-Continental opened in April, 1984, it had an occupancy rate of 55%.
Year-to-date occupancy of all San Diego hotels averaged nearly 79% through July, according to the San Diego Convention & Visitors Bureau.
Even the Inter-Continental’s average room rate of $113, which Stangl says is about $10 higher than that of its competitors, hasn’t hampered business, which caters to those seeking a luxury setting. Most of the hotel’s customers have come from within California, rather than out-of-state tourists or businesses travelers.