Hotel Occupancy Up in January, but Room Rates Down : Tourism: Conflicting figures may indicate that hoteliers negotiated lower prices with guests to attract large groups.
Orange County’s hotel occupancy rates rose in January, but the potential sign of recovery was tempered by another decline in the average rates hoteliers were charging for nightly stays.
The average occupancy rate countywide was 62.56%, up from 57.41% for the same month last year, according to figures from PKF Consulting in Los Angeles. However, that figure was still below the 63.1% average for all of 1992.
“My gut reaction is that Orange County may already have hit the bottom” in occupancy rates, said Bruce Baltin, director of PKF. “It will gradually go up.”
Yet many analysts say the true health of the hotel market is reflected in room rates, which fell an average of 1.4% in January, to $80.16 from $81.25 a year earlier. The conflicting figures might be a sign that hotel managers have negotiated lower rates with convention and seminar guests in an effort to attract large groups to fill their rooms.
“Hotels are cutting low on their rates to get their occupancy up,” said Bob Perlman, hospitality specialist at Grubb & Ellis in Anaheim.
North County hotel room rates, already the lowest in the county, posted the sharpest drop, to $58.95, down 8% from $64.10.
“I have never seen a recession where rates have declined like this,” Baltin said. “It would take a huge increase to capture what it was.” In past recessions, he noted, room rates have often kept pace with the Consumer Price Index.
The glut of hotels built in the late 1980s, as well as a growing list of debt-troubled properties, has depressed the prices that hotels charge. In some areas, room rates have lagged inflation for years, even before the downturn in the economy, said David Philp, manager of hospitality consulting at Kenneth Leventhal & Co. in Newport Beach.
“With so much product out there, any time you see an increase in one (indicator), . . . you might see a decrease in another,” he said. “But you need a much longer-term sampling to determine a trend.”
The occupancy rate showed the greatest improvement in the John Wayne Airport area, rising to 63.47% from 57.34% a year earlier. Airport-area hotels, the priciest in the county, also reported the biggest room rate gains, to an average of $87.65 a night, up from $86.11 for the same month a year earlier.
“The airport area hasn’t seen new product in a long time,” Philp said. And the room rates there, he said, “are not going to change dramatically in the next two or three years.”
South County hotels still lagged the rest in occupancy rates, although the average rate increased to 61.28% from 56.72%.
Orange County fared better than San Diego County, where an 850-room Hyatt opened in December. San Diego County occupancy dropped to 50.5% in January from 54.6% a year earlier. Room rates fell to $71.51 from $72.18.
Occupancy and room rates jumped in Los Angeles County, mainly because Pasadena hosted the Super Bowl. Occupancy climbed to 61.6% from 59.5% a year earlier. Room rates rose to $81.90 from $77.29.
Hotel Occupancy Up, Room Rates Down
Industry experts see the rise in occupancy rates at Orange County hotels as a result of lower room rates rather than an indication that tourism may be recovering from its slump. OCCUPANCY
1992 1993 % Change Anaheim 58.8% 63.6% + 8.2% South County 56.7 61.3 + 8.0 Airport 57.3 63.5 +10.7 North County 52.6 57.2 + 8.7 Overall average 57.4 62.6 + 9.0
AVERAGE DAILY ROOM RATE
1992 1993 % Change Anaheim $83.17 $81.41 - 2.1% South County 78.27 79.23 + 1.2 Airport 86.11 87.65 + 1.8 North County 64.10 58.95 - 8.0 Overall average 81.25 80.16 - 1.4
OCCUPANCY BY ROOM COST
1992 1993 % Change Less than $35 63.5% 59.9% - 5.7% $35.01 to $55 43.9 47.5 + 8.3 $55.01 to $75 60.6 66.8 +10.2 $75.01 to $100 62.2 67.4 + 8.3 More than $100 63.9 70.1 + 9.8 Overall average 57.4 62.6 + 9.0
OCCUPANCY BY HOTEL SIZE
1992 1993 % Change Less than 100 rooms 56.2% 61.5% + 9.3% 100 to 199 rooms 57.7 58.5 + 1.3 200 to 299 rooms 47.6 53.8 +12.9 300 to 600 rooms 54.5 62.1 +14.1 More than 600 rooms 66.6 72.4 + 8.7 Overall average 57.4 62.6 + 9.0
Source: PKF Consulting
