Hotel Room Rates Rise 10% in L.A. Area

The average cost of a hotel room in Greater Los Angeles jumped nearly 10% during the first half of the year even as occupancy rates hit a plateau, the Los Angeles Convention & Visitors Bureau reported Monday.

Occupancy ticked up only a modest 0.8% while the average room rate climbed to $108.41 a night, about $9.44 more per room than compared with the first six months of 1997, the report indicated.

Both trends are expected to continue, industry observers said, given steady demand for Los Angeles-area hotels, which collectively filled more than three-quarters of their rooms during the first half of the year.

Michael Collins of the convention and visitors bureau said occupancy rates probably won’t rise much higher because the regional hotel market has hit its “effective capacity”--an industry standard that predicts how many bookings a hotel can hope for in a given market. In the Los Angeles area, the figure has been calculated between 75% and 80%, he said.

But Collins predicted that room rates will continue to climb as area hoteliers attempt to set their prices closer to rates in other major cities, such as New York, which has an average nightly room rate of $201.54.

“The market here has been undervalued for a long time,” Collins said.

Although economic turmoil in Asia has slowed tourism from the Far East, particularly from Japan and South Korea, business and convention travel to the region remained high. During the first six months of 1998, Collins said, the Los Angeles Convention Center was booked about 70% of the time.

Although room rates in Orange County mirrored the trend in Los Angeles County, occupancy in Orange County was down almost 5% compared with the first six months of last year, said Bruce Baltin, senior vice president for PKF Consulting, which studies the hospitality industry.

Heavy construction in Anaheim, home of Disneyland and other attractions, has received much of the blame for the occupancy drop, said Jack Kyser, chief economist for the Los Angeles Economic Development Corp.

In Los Angeles County, six “sub-markets” identified by the convention and visitors bureau also reported lower occupancy. The Valencia area, home to the Magic Mountain and Hurricane Harbor amusement parks, suffered the largest drop at 5.8% compared with last year.

“I would say the weather was the real culprit in this,” said Cheryl Adams of the Santa Clarita Valley Chamber of Commerce, who said the drop was mostly a result of heavy El Nino rains that lashed the area into the late spring.

Long Beach, on the other hand, posted the highest occupancy growth of any sub-market, logging a 5.1% increase over last year.

Kyser attributed the jump largely to the opening of the city’s Aquarium of the Pacific and the renewed popularity of the Queen Mary following the success of the movie “Titanic.”