Hotels Still Registering Solid Gains : 3,295 New Rooms Haven’t Dampened Occupancy Rates

Driven by the area’s booming tourism, San Diego County’s hotel industry racked up another solid year of growth in 1988, with occupancy rates continuing to outpace the state and nation despite a nearly 10% increase in hotel rooms available.

And, despite the expected addition of another 2,338 rooms in 1989, which would amount to a 6% one-year jump in rooms on top of last year’s increase, hotel industry observers see little chance of a severe hotel glut developing in the near future.

The industry’s optimism is based in large part on the scheduled January, 1990, opening of the San Diego Convention Center, a facility that will attract up to 14,000 visitors weekly to San Diego and, when operating at capacity, will create an almost overnight demand for up to 5,000 more hotel rooms.

Demand Was Anticipated

The anticipation of that added demand was responsible for the construction of many of the 3,295 hotel rooms that opened in the county last year. The addition brought the county’s inventory to 37,796 hotel rooms, a 9.6% increase, according to the San Diego Convention and Visitors Bureau. The county saw about 3,000 hotel rooms built in 1987, said Al Reese of the bureau.

Among the new hotels coming on line in 1988 were landmarks such as the 300-room Le Meridien in Coronado; the 350-room San Diego Marriott Mission Valley; the 335-room Embassy Suites and the 683-room second tower of the San Diego Marriott Hotel & Marina, both in downtown San Diego.

Since the inventory of San Diego hotel rooms grew faster than demand, the average occupancy rate of 90 hotels surveyed by Pannell Kerr Forster of San Diego dipped to 71% for the first 11 months of 1988, down from the 75% rate over the same period the previous year.

However, the hotel market here is still stronger than the 69% average statewide occupancy rate and the 64% nationwide rate, said Mark Lukens, senior manager for Pannell Kerr Forster’s management advisory services department in San Diego.

“It was a pretty strong market overall in 1988, and it looks like we’re in for pretty much the same in 1989, with an increase in supply but a corresponding increase in demand,” Lukens said.

‘Unusual Growth’

The strength of the San Diego hotel market was demonstrated by the 6.6% growth in hotel room nights sold through November, 1988, compared to the same 11 months in 1987, according to ConVis figures.

“That is unusual growth, unusually high for the U. S.,” Lukens said. “It’s due to several factors, mainly the growing reputation and appeal of San Diego as a tourist destination. Also, San Diego is becoming known as more of a group destination, because of the marketing efforts of hotels such as the Marriott and the Meridien.”

Joe Rothman, manager of the San Diego Marriott, said his hotel did better than expected, taking into account the opening of the hotel’s second, 683-room tower in January. “Our occupancy was nearly 70% for the year. We doubled our size, but our occupancy went up.”

Perhaps because of the softer occupancy rates, the average daily room rates paid at San Diego County hotels surveyed by Pannell Kerr Forster went up only 1% in 1988, to $79.05, Lukens said.

Doing better than the county as a whole were hotels in South Bay, where the average daily room rate was up 8% to $40.92. Room rates at hotels in Coronado, Harbor Island, Shelter Island, La Jolla and the Golden Triangle area were up an average 6%, Lukens said.

According to the San Diego office of Laventhol & Horwath, a firm that tracks the hotel industry, downtown San Diego hotels fared better in occupancy in 1988 than expected, despite the opening of several hotels over the past two years. Many of them have been hurt by the two-year delay in the opening of the convention center.

“Everyone was concerned that the downtown area would be a disaster area last year, but it was a surprisingly strong year,” said Greg Peerbolte of Laventhol & Horwath.

According to Laventhol & Horwath’s Bruce Goodwin, the occupancy at downtown San Diego hotels dropped minimally in 1988 to 72% through November from 73.1% over the same 11 months in 1987, depsite all the added rooms.

“Average daily room rates were generally flat (compared with last year) because the older hotels tried to shore up occupancy rates with heavy discounts,” Goodwin said. “The market will continue to stabilize this year and I think we’ll see rates become more aggressive next year.”

Among the hotels scheduled to come on line in 1989 are the 400-room Sheraton Torrey Pines, the 243-room Del Mar Hilton and the 264-room Symphony Towers Marriott all-suites hotel, said Reese.