Falling Hotel Occupancy Rates Don’t Augur Well for Tourism
Hotel occupancy rates decreased nearly 5% in Orange County in the first four months of the year, and the market probably isn’t going to get much better this year.
A recent survey by Pannell Kerr Forster, a hotel consultant, found that occupancy rates in Orange County’s big hotels dropped from 67.4% in the January-to-April period of 1989 to 64.2% for the same period this year.
The drop is reflected in the hotel occupancy levels being reported in California’s other major metropolitan areas during the first quarter of the year, Pannell officials said.
The study confirms anecdotal evidence from local hoteliers, who say business has been off for the last few months. They blame everything from construction work on a new terminal at John Wayne Airport to cutbacks in travel budgets by defense firms preparing for cuts in Pentagon spending.
“It’s not that business travelers aren’t coming,” said Jim Burba of Pannell Kerr Forster’s Newport Beach office. “It’s just that they’re not coming nearly as much.”
The slump in demand for hotel rooms couldn’t come at a worse time. When a wave of new hotels were built around the county in the late 1980s, the intense competition meant low occupancy levels and room rates for most hotels. But construction of new hotels recently had slowed to a trickle, and hotels last year were reporting that they were filling more rooms. So the decline is a jolt for hotel operators.
“This was when the market was supposed to be catching its breath and growing back,” Burba said. “Instead we’ve just got a different problem, with demand instead of supply this time.”
The low-occupancy situation means flat or, in some cases, reduced room rates at local hotels. Burba said some hotels have been cutting rates to hold on to business.
The average room rate for Orange County, the survey found, was $71.29 a day during the first four months of this year, up from $70.68 last year, and nowhere near the rate of inflation over the same period.
For the local tourism industry, the most disturbing news in the figures is that one of the largest drops in occupancy through April was in the Anaheim area, which means tourism and convention business is probably off so far this year. Anaheim was down 6.1% compared to the first four months of last year. The airport-area hotels, which cater mostly to business travelers, also were down, but by only 2.0%.
Orange County, however, is not the only area suffering lower occupancy rates. In the first quarter, San Francisco reported the lowest rate, at 61.5%--probably a result of the October earthquake. San Diego hotels reported filling 65.4% of their rooms, and Los Angeles hotels, 68.4%.
Business travel seems likely to be off at least slightly the rest of the year, given corporate uncertainty about the condition of the nation’s economy. So the health of the local industry will depend a lot on the Anaheim area and the summer tourism and convention business, Burba said. And that’s not a certainty, he said, because big conventions tend to be a cyclic business for a city such as Anaheim.
ROOM AT THE INNS
A survey of 57 Orange County hotels and motels, which together operate 14,188 rooms, found that occupancy has fallen 4.8% in the first four months of 1990. Occupancy Rate In percent
Area 1990 1989 Anaheim 66.6 70.9 Airport/Newport Beach 64.5 65.8 South County 55.7 60.7 North County 52.7 57.1 Countywide 64.2 67.2
Average Daily Room Rate
Area 1990 1989 Anaheim $69.86 $70.47 Airport/Newport Beach 77.64 74.37 South County 76.92 88.94 North County 48.78 49.57 Countywide 71.29 70.68
Source: Pannell Kerr Forster
