Hotel Occupancy Drops but Rates Rise in First Quarter

Hotel occupancy in Orange County continued to dive in 1991’s first quarter as the recession and the Gulf War took a toll of tourism and business travel.

Room rates, on the other hand, rose this year compared to the first three months of last year, but rates were still lower than what local hotels charged guests in early 1989, according to the Irvine office of Pannell Kerr Forster, a hotel consultant.

The war scared many tourists and business travelers, and the recession finished off many of the rest. A drop in travel to Orange County, for instance, knocked occupancy down to 63% in March.

Actually the Orange County hotel industry has been in the dumps for about five years. Before the recession, a wave of new hotels in the late 1980s flooded the county with thousands of excess rooms, depressing room rates and occupancies.

That problem started to improve because few hotels were built in the last two years.

“Financing to build hotels was almost null and void,” said Rich Schwartz, a manager at Pannell Kerr Forster. “People are more likely now to acquire them or (change the management company) rather than build a new one.”

The situation isn’t unusual. Many cities nationwide saw too many hotels built in the 1980s because of the availability of money to finance construction.

Still, that’s small consolation to local hostelries. Room rates, the consulting firm found, took a sharp drop between the first quarters of 1989 and 1990, then climbed back to almost the 1989 levels in the first three months of this year.

In March, for instance, the average room cost $75.26 a night; a year ago it was $70.34 and in 1989 it was $75.51.

(For all of 1990, room rates actually climbed 2% over 1989, but that was far below the inflation rate last year of 6%.)

As for occupancy, the figures show that in March only 63% of the rooms in the county’s large hotels were occupied.

That was down from 70% in 1990, and from 76% in 1989.