Hotels Ready and Waiting for Convention Center to Fill Their Registers : Tourism: Delays in the center’s construction left San Diego with a hotel room glut, but owners are hopeful that 1990 will be a different story.

In June, 1985, hotel consultants Laventhol & Horwath told developers in a report that if they didn’t “get cracking” to build hotels in downtown San Diego, there would be a serious shortage of rooms by the time the San Diego Convention Center, then in its planning stages, opened its doors.

Smelling the potential for profit, hoteliers heeded the call and began breaking ground on dozens of hotels countywide, eventually adding some 11,000 rooms to the county’s supply over the next four years, a construction boom unequaled in the United States except in Las Vegas and Orlando, Fla., said Al Reese, spokesman for the San Diego Convention & Visitors Bureau.

Neither the consultants nor the developers could know that the Convention Center’s opening would be plagued by two years of delays. Now, a few days before the center stages its first large-scale convention, San Diego finds itself in the midst of a hotel room glut that has given travelers more choice and better rates, but has made it more difficult for hotels to fill their rooms with guests.

“When you add 11,000 rooms to any area, obviously the pie gets sliced a little thinner,” said Larry Saward, general manager of the Sheraton Grand on Harbor Island. “With more rooms, the competition is keener, and that contributes, to some extent, to lower occupancy rates.”

Total hotel rooms in the county now number more than 40,000, a 50% increase since 1984.

Although the county’s average occupancy rate of 69.6% from January through October of last year is better than the national average of 68.4%, the figure represents a significant drop from previous years. In fact, the county’s year-to-date occupancy rate has dropped 3.6% from the comparable 1988 period, and is at its lowest level since at least 1983, according to statistics compiled by Laventhol & Horwath.

The decline in occupancy occurred despite a 1.6% increase in overnight visitors to the San Diego area during the same period and a 2.8% rise in total hotel room nights sold. That the occupancy rate softened despite increased visitor traffic shows that hotel room supply is outpacing demand.

But the glut may be short-lived, or so hotel owners hope. The San Diego Convention Center, which hosted its first consumer show in November and will stage its first full-fledged convention Wednesday through Saturday, is expected to generate 242,000 additional hotel room night sales in 1990, a 2.4% increase in demand by year’s end.

The center so far has booked 32 conventions and trade shows for 1990, ranging in size from 3,000 to 15,000 visitors per show, including such groups as the National Spa & Pool Institute, the National Needlework Assn. and the Assn. of Secondary School Principals, Reese said.

Through much of 1989, the oversupply of hotel rooms was quite beneficial to San Diego hotel guests. Overall, average room rates countywide for the first nine months of 1989 hardly budged from the previous year, increasing just 2 cents, to $78.35 per night, a rate of increase that didn’t begin to keep pace with inflation.

Average room prices were up only slightly in downtown, and bay-area hotels and hotels in Old Town on average had to cut prices by 3.4%, according to statistics compiled by the Pannell Kerr Forster accounting firm.

From a hotel owner’s point of view, however, the addition of so many hotel rooms to the market before the city was able to generate enough demand had a devastating effect. Especially hard hit were those that lacked the meeting space needed to host large groups of visitors and that were depending on the Convention Center to fill its rooms with guests.

Anticipating the Convention Center opening, originally set for 1987, developers began to build and restore a number of hotels in the 1980s, including the U.S. Grant, the Omni San Diego, the San Diego Marriott and the Horton Grand.

But Convention Center construction soon fell behind schedule. Excavation of the waterfront site where the center would eventually stand took months longer than expected. Then, after the initial bids came in millions of dollars over budget, port officials reluctantly agreed to a rebid, which set back the construction date a full year.

The San Diego Marriott, which timed the opening date of its second tower to coincide with the opening of the Convention Center, had no choice but to press forward with its construction plans, even if it meant opening nearly two years before the Convention Center.

“Hotel development is not something you can turn on and off like a faucet,” said Laventhol & Horwath principal Greg Peerbolte.

As it turned out, the Marriott suffered little from the delay in the Convention Center’s completion. With more than 1,300 rooms, the Marriott has been able to stay in the black by hosting smaller business conventions and meetings, general manager Joel Rothman said.

But for many other hotels, the delay wrought serious financial damage. Two years ago, the U.S. Grant filed for protection under Chapter 11 of the federal Bankruptcy Code, finally pulling out of its financial troubles last April. By that time, the Omni San Diego had also gone bankrupt.

“It’s common knowledge downtown that hotels were built, and this one restored, on the understanding that the Convention Center would be completed earlier,” said U.S. Grant spokesman David Rushton. “The occupancy levels were not as high as anyone anticipated.”

Even with 32 trade shows and conventions scheduled for this year, officials predict it could be at least a year before the center begins operating at a pace that would satisfy the local hotel industry.

“I would venture to guess that within another couple of years, there might be another wave of hotels being booked,” said Paul Desrochers, assistant vice president of the Centre City Development Corp. “It appears we could still support a couple more hotels in a couple years--and I’m being conservative.”

Susan Guthrie, director of sales and marketing for the Westgate Hotel in downtown San Diego, agreed: “I think a lot of us are glad 1989 is over. We had a lot of premature growth this last year, with a lot of rooms opening up before the Convention Center. But the downtown hotels will be immediately affected by the Convention Center opening, and certainly we’re optimistic we’ll have a much better year because of it.”

Reese, of the Convention & Visitors Bureau, however, was more cautious about the immediate effect the Convention Center. His agency faces “a very serious challenge” trying to market San Diego to get the hotel rooms filled, he said.

“We’re going to do our best to bring it (the decline in occupancy rates) to an end, but, looking at the number of new hotel rooms that are scheduled to come on line here in the next few years, it is quite likely that it will continue.”

Estimates on the number of new hotel rooms expected to be added to the county’s inventory next year range up to 2,250 new rooms, a 5.6% increase from the year before. Hotels expected to open this year include the Symphony Towers Marriott and the Pan Pacific Hotel, both downtown, the Radisson Inn in National City and the Carlsbad Village Hotel in North County.

About half the new rooms will be located in downtown San Diego, with the majority of the rest in North County.