Flat Occupancy Rates Seen for Hotels in State

As California’s hotel building boom continues, the state’s hotel industry is losing its lead in occupancy rates, according to a study expected to be released next week.

Hotels in the state filled an average of 69% of their rooms in 1984, and even though an estimated 14,600 new rooms will open throughout California this year, the occupancy rate will stay about the same, according to the report by Pannell Kerr Forster, a Los Angeles accounting firm that specializes in the hospitality industry.

The report indicated however, that the state is losing its edge. The national occupancy rate is expected to climb to 70% this year, according to Pannell Kerr Forster spokeswoman Lauren Schlau. And by 1986, the national average is expected to hit 72%--while the study shows that California’s hotels will see occupancy rates drop to 67.6%.

Supply and Demand Factor

The report also cautions that while California is not yet overrun with hotel rooms, developers and hoteliers should “monitor supply and demand more carefully over the next several years.”

Even though the state’s hotel occupancy rates are dropping, tourism isn’t expected to decline, the study shows. An increasing number of hotel rooms means that the total number of guests can grow without changing the overall occupancy rate.

While a third of the 12 major California market areas surveyed by the firm have posted modest gains in occupancy rates so far in 1985, Orange County has led the pack, increasing to 69.2% from 65.1%, despite a substantial increase in the number of rooms available.

By comparison, the occupancy rate in the greater Los Angeles area is expected to stay relatively flat this year, growing to 69.6% from 69.1% in 1984.

Growth in Central County

About 3,200 new rooms will have been opened in Orange County by the end of the year, most of them--along with the greatest rise in occupancy rates--in the central part of the county--cities such as Anaheim, Garden Grove and Orange, whose coffers rely heavily on tourism.

Next year, the report estimates an additional 2,880 rooms will be built in the county--a 13% increase.

In Los Angeles, the number of hotel rooms has increased to more than 51,000, up 4% from last year, but the stable occupancy rate shows that demand has kept up with the growth. The report predicts, however, that the supply of rooms will exceed demand during 1986, resulting in a decline in occupancy to 67.7%.

Although Pannell Kerr Forster foresees a modest decrease in overall statewide occupancy rates in 1986, the firm projects some growth in the number of hotel rooms and fairly strong occupancy rates after that, Schlau said.

But David Brudney, president of David Brudney & Associates, a Los Angeles hotel consulting firm, said he believes that there already are too many rooms, particularly in Orange County, and that some hotels could fall on hard times.

“As an industry, we deceive ourselves, and, as an area gets hot, we tend to overbuild,” he said. “Usually there is a four-year lag time from the time you first see an area till you get all your rooms built,” he said. “What happens is that by the you get all your rooms open, it’s not a hot spot.”

The keys to surviving the stepped-up competition, said consultant Brudney, will be marketing and good service.

“Those hotels, small, medium, large and the megahotels that run first-class operations . . . and have effective sales and marketing programs will be the ones that get their share of the business and survive,” he said. “If they take the customer for granted, they will be the ones that get into trouble and (then) size and name doesn’t really make any difference.”