Where Have the Tourists Gone? : Economy: Orange County’s $7-billion-a-year ‘fun business’ will rebound from recession, but damage has been done.

On a cloudy Memorial Day weekend two years ago, Disneyland president Jack Lindquist was doing business with a smile on his face, unaware of the trouble that would darken the Magic Kingdom in a matter of days.

Even though he had worked at Disney for 35 years, Lindquist still looked forward to the start of summer like a little kid, anxious to play host to “all those wonderful families from all over the United States.”

There was just one problem that summer of 1990.

“They didn’t show up,” Lindquist said.

What Lindquist and his colleagues couldn’t have seen was an oncoming recession that has battered Mickey Mouse and left bruises all over Orange County’s tourism and entertainment industry.

The $7-billion-a-year fun business in Orange County--perhaps unlike its defense industry--will eventually overcome the recession and go on to bigger and better things, including Disney’s own planned $3-billion Anaheim expansion.

What’s unclear--despite a recent surge in airline bookings--is just how many of today’s hoteliers, restaurateurs, travel agents and tour operators will still be around when the good times return.

“Does anyone see a light at the end of the tunnel? No one does yet. That is kind of scary,” said Doug Cavanaugh, outgoing president of the Orange County chapter of the California Restaurant Assn. “A lot of guys who have hung on this long don’t know how much longer they can hang on. . . . Unfortunately, I believe there will be quite a few more closings before this is over.”

Consider the following:

* More than one out of 10 tourism jobs in Orange County vanished between 1989 and today. By comparison, the recession of the early 1980s caused no decrease in tourism-related employment. The biggest cuts have come in the restaurant business, as upscale eateries such as the Villa Nova and Rex restaurants in Newport Beach become fodder for the bankruptcy courts.

* Hotels in Orange County during the first four months of this year had an average occupancy rate of only 58.9%, meaning that they were essentially half-empty--or half-full, depending on the disposition of the innkeeper. Thirteen local hotels are already in bankruptcy or foreclosure.

* Disneyland attendance has fallen 17% from 14.4 million guests in 1989 to 11.6 million visitors at the end of 1991, according to estimates by Amusement Business magazine. Disney disputes these figures but refuses to release actual results.

* Visitors to Orange County fell 2.9% in the first three months of this year compared to the same period a year earlier. Last year, 37.8 million people visited Orange County, down almost 2% from 38.4 million guests in 1990, according to the Anaheim Area Visitor and Convention Bureau.

For a region that has been compared to a theme park by both its devotees and its detractors, this is serious business. The reverberations are being felt in the unlikeliest locations, extending well beyond the 10% of Orange County residents working in tourism or entertainment-related jobs.

In some Orange County communities, it’s no exaggeration to say that the current drought of visitors is hurting local parks, libraries and at least one police department because of a drop in tourist-generated tax revenue.

Anaheim--the epicenter of Orange County’s tourism business--estimates it has lost $29 million in tourist-related taxes since the start of the recession.

“We’re making the largest budget reductions the city has made that anyone can remember,” said Jim Armstrong, Anaheim’s assistant city manager. “Everybody should be concerned about the recession’s effect on tourism.”

Since it began two years ago, the recession has gotten a helping hand in pulling down the tourism business--first the Persian Gulf War erupted, and then Los Angeles did. Both episodes scared away foreign tourists.

“We are dealing in an industry where perception is reality and the perceptions on those television screens (of the Los Angeles riots) were punishing,” said Michael Collins, vice president of public affairs for the Los Angeles Convention and Visitors Bureau.

Many foreign visitors--unfamiliar with the sheer size of Southern California--automatically assumed Orange County went up in flames along with parts of South Los Angeles.

“The image on those television screens now occupies 4,000 square miles,” Collins said. “I had a phone call from a lady in London asking me if she thought it was safe for her to come to San Diego.”

The Japanese, in particular, are staying home.

One Orange County tourist official tells the story of a Japanese flight scheduled to come into Los Angeles after the riots. About 450 passengers were booked on the flight but when the plane took off, only seven were on board.

Tokyo Disneyland officials explained to their Anaheim counterparts that the Japanese are just being polite.

“You don’t visit somebody else’s house at a time of trouble,” Lindquist said.

For Orange County attractions heavily dependent on international travelers--like Movieland Wax Museum in Buena Park--the volatile mix of the recession and the riots has gone over like a Molotov cocktail.

“For the first 3 1/2 or four months of this year, we were running 7% to 9% above our 1991 figures,” said Movieland General Manager Mark Edwards. “Unfortunately, the riots and bad press we received worldwide caused us to see a drop of anywhere from 35% to 40%.”

Generally, local economists are predicting small revenue increases in the Orange County and Southern California tourism markets from lows in 1991, but nothing compared to the heady days of the late 1980s.

First Interstate Bancorp predicted earlier this month that California’s share of the tourism pie would grow 4%, from $54 billion in 1991 to $56.1 billion in 1992.

Chapman University economist Esmael Adibi has forecast that Orange County’s tourism employment will grow by 2.9% in 1992, down from a pre-riot prediction of 5%.

“This will not be a banner year for tourism,” said Lynn Reaser, chief economist and senior vice president of First Interstate.

For the last two decades, the tourism business has pretty much coasted its way to success. The 1970s saw the birth of the two-income family and suddenly masses of Americans thought nothing of winging their way to Europe and the South Pacific, not to mention Southern California. The ‘80s were the era of five-star resorts, like several that dot the Orange County coastline, and cruise ships that plied the Caribbean or the Mediterranean.

Nowadays, thrift is in fashion.

In fact, the recession may do more for the road trip than “Thelma and Louise” ever could. Two typical family vacations this year--according to tourism experts--are day trips to Disneyland and the traditional visit to relatives where room and board are free.

The Anaheim Area Visitor and Convention Bureau reports that visitors staying in Orange County homes instead of hotels increased 2.5% in the first three months of 1992 after already jumping nearly 1% from 1990 to 1991.

Increased passenger landings at John Wayne Airport, when viewed in light of declining hotel occupancy rates, suggest the percentages may be even greater. About 373,000 more people arrived in 1991 than 1990--a 16.2% increase--while hotel occupancy fell from 65.2% to 61.1%.

“Families are getting back to the basics,” said Edwards of the Movieland Wax Museum. “What comes to mind is the old Chevrolet ad, ‘See the U.S.A. in your Chevrolet. America is inviting you to call.’ ”

Public and private entities are cutting back too.

William Snyder, president of the Anaheim visitor bureau and a 30-year veteran of the tourism business, said part of the decrease in Orange County visitors can be attributed to the fact that corporations are sending fewer and fewer people to conventions here.

“In 1991, for most of the groups--and it’s tough to generalize--the companies exhibiting (products) were sending maybe six or seven people instead of 10,” Snyder said.

Given these grim statistics, Orange County’s tourism and entertainment executives are trying to figure out how to beat the odds and attract droves of travelers while still making a profit.

It’s quite a high-wire act.

Highly-leveraged hotels, for instance, are carrying on a fare war easily rivaling that of the airlines.

One large-scale but bankrupt hotel in Irvine is offering a double room for just $49 a night if it’s booked 21 days in advance--breakfast for two included. Hotel after hotel is giving customers half-off rooms.

“It’s like a feeding frenzy,” said David Philp, manager of hotel consulting at Kenneth Leventhal & Co., a CPA firm in Newport Beach. “Sooner or later, these people are going to run out of money (and) they are either going to have to file bankruptcy or give the property back to the lender.”

Restaurants, no stranger to the bankruptcy courts themselves, are also improving service and occasionally cutting prices.

“The buzzword for the ‘90s is value,” said Cavanaugh from the local chapter of the California Restaurant Assn. “When you have an environment in which your sales keep going up every year, people get lazy.”

One sector of Orange County praying for a tourism turnaround is local government. Vacationers leave behind hundreds of millions of dollars every year in sales and hotel taxes.

Probably no community is more dependent on the money of tourists than Anaheim. Sales and hotel taxes are Anaheim’s two largest sources of revenue.

The city has seen its sales tax revenue fall nearly 13%, from $36.6 million in fiscal 1990 to an estimated $32 million in fiscal 1992.

Since the start of the recession, Anaheim has eliminated 10 police employees, cut 22 positions in the Parks and Recreation Department, laid off a city prosecutor and started to close its libraries two days a week.

Tourism officials say these kinds of problems will be only temporary. They claim to see nothing but opportunity ahead.

Several South American economies are getting so strong that a good chunk of their citizens will soon have enough money to travel here. And the citizens of Eastern Europe now at least have the liberty to travel even if they still lack the means to do so.

“Tourism is one of the truly great growth industries globally,” Lindquist said.

On a local level, Disney is planning on a $3-billion expansion in Anaheim that includes a theme park called Westcot Center, three new hotels and a 5,000-seat amphitheater. A Disney spokesman said construction could start as early as next year.

Once that project is completed, Lindquist said, Disney plans on focusing as much media attention on Anaheim as it did on Paris during the April opening of the Euro Disney Resort. Next year, Anaheim will open its own 20,000-seat arena, and talks about a bullet train from there to Las Vegas are still alive, if just barely.

“Anaheim will become the No. 1 urban destination resort in the world,” Lindquist predicted.

This story was reported by Times staff writers Gregory Crouch, Dan Weikel and Sonni Efron, and written by Crouch.

Trouble in Tourism

Orange County’s tourism industry is experiencing hard times during this tenacious recession. Numbers are dropping across the board.

Hard Times at Mickey’s House

Amusement Business Magazine estimates that Disneyland attendance has fallen 17% between 1989 and last year. Disney contests those figures but declines to release results.

Admissions in millions:

1991: 11.6

Plenty of Room at the Inn

Market analysts say an average occupancy rate in the 50% to 60% range indicates a substantial number of hotels might be in financial trouble.

Average hotel occupancy rte:

1992: 58.9%*

* January through April

Fewer Jobs

First-quarter 1992 figures indicate that the number of jobs in all tourism-related businesses has fallen nearly 11%, on a seasonally adjusted basis, since the 1989 peak.

In thousands of jobs:

1992: 116.8*

* January through March

Beaches Less Crowded

Unseasonably cool summer weather may account for part of the decline in visitors to Orange County’s state beaches last year.

State beach attendance, in millions:

1991: 5.49*

* Estimate

Sources: Smith Travel Research, California Employment Development Department, Amusement Business Magazine, California Department of Parks and Recreation

Researched by GREGORY CROUCH and SONNI EFRON / Los Angeles Times

Recession Cools Tourism

Falling hotel occupancy rates and declining attendance at Disneyland indicate that tourism has suffered greatly in Orange County during the longest economic slump since the Great Depression. Fewer tourists mean fewer jobs for Orange County residents, less money generating less sales tax revenue for cities and financial headaches for the hotel industry.

TOURISM-RELATED EMPLOYMENT

An 11% increase in jobs for the amusement-recreation industry between 1988 and 1991 was not enough to offset losses in both the restaurant and hotel businesses. First-quarter 1992 figures indicate the number of jobs in all tourism-related industries has dropped nearly 11% on a seasonally adjusted basis since the peak in 1989.

Tourism-Related Jobs 1988 1989 1990 1991 1992* Eating, drinking places 86,500 85,800 82,900 77,000 73,600 Hotels, other lodging 20,100 20,800 20,800 19,700 19,100 Amusement, recreation, 23,500 24,200 25,200 26,000 24,100 including movies Total jobs 130,100 130,800 128,900 122,700 116,800

* 1992 figures are for the first quarter, a traditionally slow period for the industry.

SALES TAX REVENUE

Tourists account for an unknown percentage of sales tax revenue in Orange County cities, but sales tax revenue declined in sync with falling hotel occupancy figures:

(In millions of dollars)

City 1986-87 1987-88 1988-89 1989-90 1990-91 1991-92 Anaheim $30.6 $32.8 $33.8 $36.6 $33.4 $32.0 Buena Park 9.1 9.5 9.9 10.3 9.6 8.3 Huntington Beach 16.9 17.5 17.5 18.4 16.9 16.6 Laguna Beach 1.6 1.8 2.1 2.4 2.3 2.1 Newport Beach 10.7 11.2 12.0 11.9 12.4 11.5

HOTEL VALUES

Hotels in the Anaheim area have declined in value at a faster rate since the recession’s onset than those nationally, but at a slightly slower rate than those in Los Angeles:

Location 1989-90 1990-91 Anaheim area -13% -20% Los Angeles -12% -28% Riverside -15% -15% San Diego -11% +6% U.S. average -5% -14%

Sources: California Employment Development Department; State Board of Equalization, city finance departments; Hospitality Valuation Services Researched by GREGORY CROUCH, DAN WEIKEL, SONNI EFRON / Los Angeles Times