O.C.-Area Hotel Rate Jump Ranks 3rd in U.S.

Increased business from vacationers and conventioneers prompted hotel operators in the Anaheim-Santa Ana area to push through some of the biggest rate hikes in the nation last year, according to an industry study released Tuesday.

Daily room rates surged 12.7% to an average of $79.68 in the first quarter of 1997 from the same period last year, making Anaheim-Santa Ana third in the country in size of rate increases. San Francisco topped the list, posting a 14.3% increase, followed by New Orleans, where prices surged 13.5%, according to Coopers & Lybrand’s Lodging Research Network.

The big jump in rates reflects just how low the market sank in the early 1990s, when the California recession and a string of such disasters as the Los Angeles riots forced hotel operators to cut prices and lock in less expensive long-term contracts with tour operators. Now those contracts have expired and owners are renewing at higher rates, analysts and owners say.

“The rates are shooting up because they were so depressed before,” said Bill O’Connell, partner in four Best Western Stovall’s Inns in Anaheim and chair of the Anaheim-Orange County Visitors and Convention Bureau. “Anaheim is still a bargain if you compare it to other cities.”

Indeed, prices in Anaheim-Santa Ana are close to the national average of $74.73, but have been increasing at almost twice the pace of those around the country.

Besides San Francisco and the Anaheim-Santa Ana area, two other California metropolitan areas also ranked in the top 10 in rate increases. The average daily room rate in San Diego climbed 10.4% to $84.17, putting it in sixth place, while rates in Los Angeles-Long Beach increased 8.9% to $83.50, in eighth.

“This is just bringing Southern California up to where it should be,” said Michael J. Mahoney, director of Cooper & Lybrand’s hotel services group. Mahoney says the Southland has trailed other hotel markets that have been on an upward swing for years.

Now hotel markets like Atlanta, Phoenix and Nashville have reached their peak and are some of the slowest to register price increases.

Orange County hoteliers attributed the steep jump in rates to an increased demand for rooms during the send-off of Disney’s Main Street Electrical Parade, a healthy convention business and the demolition of several hotels in preparation for the Disneyland Resort expansion.

“Disneyland is still a hot commodity,” said Andrew Z. Theodorou, general manager of the Holiday Inn Express in Santa Ana. Theodorou, whose hotel booked a great deal of business last year from Disneyland visitors, said he thinks the park will continue to draw a big crowd this year.

But next year, he worries demand might not be as strong. “Some people might wait for the new theme park to arrive before they make the trip with their family.”

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Bed-Rate Bump

Room rates in Anaheim/Santa Ana had the third-highest percentage increase from first quarter 1996 to first quarter 1997 among hotels nationwide. Percentage increase and average daily rates for January-March 1997:

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% increase Rate 1. San Francisco 14.3 $115.97 2. New Orleans 13.5 116.47 3. Anaheim/Santa Ana 12.7 79.68 4. Orlando 11.6 87.28 5. New York City 11.4 152.87 6. San Diego 10.4 84.17 7. Philadelphia 9.7 86.52 8. Los Angeles/Long Beach 8.9 83.50 9. Chicago 8.3 90.91 10. Tampa-St. Petersburg 8.1 80.43

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Source: Coopers & Lybrand’s Lodging Research Network