Mid-Price Hotels Will Fill Vacancy : $70-Million Complex Features Rooms From $39 to $89
A sprawling complex of six hotels with a total of more than 1,100 rooms is being positioned to fill the Orange County lodging industry’s only vacancy: the mid-priced segment.
The $70-million “Hotel Terrace” development taking shape in Santa Ana features rooms from $39 to $89 per night, in sharp contrast to the county’s spate of hotels with rooms going for $100per night and up. The project, located at the Dyer Road exit of the Costa Mesa Freeway, is scheduled for completion by May, but four of the hotels already are open.
The lodging complex is more evidence that Orange County’s business community, already one of the largest in the nation, is expected to continue growing. And with these new hotels, the southern tip of Santa Ana is emerging as the county’s mid-scale hotel center. The six Santa Ana hotels hope to capture corporate clients from the nearby John Wayne Airport area who are unwilling to shoulder the typical $100-plus-per-night rates of the deluxe hotels in Newport Beach and Irvine. The developers, however, say they are not trying--at least immediately--to compete with the tourist-oriented budget lodging that encircle Disneyland and Knott’s Berry Farm. Hotel Terrace’s developers also are keenly eyeing the continued growth of office space in the South Coast Metro area, less than two miles away.
But while the developers of the hotel complex believe that ultimately there will be enough business to keep each of the inns financially healthy, the complex is still too new to have established a reputation. Thus, the four hotels that already have opened their doors despite the heavy construction going on all around have launched a price war.
Hotel Terrace was modeled, in part, after the highly successful Hotel Circle complex of 14 mid-priced hotels and motels in the Mission Hills area of San Diego. Although Hotel Terrace is much smaller, the idea is the same: Cluster a number of hotels in a single location near a major highway. Such projects generally have strong appeal to both corporate and tourist trade.
“Something like this often has a magnetic affect,” said Harold Parker, chief executive officer of Robert P. Warmington Co., which devised the Hotel Terrace concept and is building two of the hotels on the 22-acre site. “There is a synergism here, kind of like a cluster of fast food shops or auto dealerships.”
Four of the six hotels are “all-suite” hotels, which feature two-room units and extras such as free breakfasts and complimentary cocktail hours. A recent industry survey of executives found that more than half preferred to stay at all-suite hotels, Parker said.
The hotels now open at Hotel Terrace are the 280-room Embassy Suites; Woolley’s Petite Suites, with 180 rooms; Grand Plaza Hotel, with 185 rooms, and the 153-room Super 8 Motor Inn. A 132-room Comfort Inn Suites is scheduled to open next month, followed in April by a Quality Inn Suites with 177 rooms.
With little track record with which to impress the corporate travel agents that complexes like Hotel Terrace depend on, the young development finds itself struggling. The Super 8, for example, posted only a 43% occupancy rate its first full year, said Patty Nethaway, the hotel’s general manager.
The Grand Plaza Hotel has resorted to flying a huge banner proclaiming “ALL ROOMS $45.” The Embassy Suites hotel--which at $30 million to build is the most expensive inn at the complex--has cut its room rate from $89 to $59 per night. And most of the nearly 350 rooms available at the complex’s other operating hotels are being offered at similar cut-rate prices.
’ . . . Like a Shot’
“But I firmly believe that when all the hotels are completed, this area will take off like a shot,” Nethaway said. Hotel consultants and executives agree with her. In fact, some are more optimistic than ever about the area’s crowded hotel market.
“There’s plenty of room for hotel growth in Orange County,” said Larry Kantor, the hotel industry specialist at the Newport Beach office of Pannell Kerr Forster, a large accounting firm. “Things look very strong, especially in the airport area,” he said.
Smaller hotels such as the 100- to 300-room units that mark the Hotel Terrace development are the next wave in Orange County, Kantor said. “There are few markets in Orange County that can support an additional 1,000-room hotel,” he said, “but these smaller hotels can get their fair share of business.”
At the Super 8, Nethaway said the motel’s owners are preparing to do “everything necessary to pull people in.” The inn is offering steep discounts for senior citizens and corporate customers. And to attract more tourists, it is talking with other hotel owners about a joint shuttle bus system that would cart guests to Disneyland and Knott’s Berry Farm.
The biggest beneficiaries of the hotel complex are nearby restaurants. Hershels Deli & Bake Shop--which is within walking distance of all six hotels--not only sees hotel guests at mealtime, “but the hotels are also using us for catering,” manager Steve Snyder said.
