Hotel Occupancy Is Strong in 1998 Despite Rate Hikes

Despite a nearly 10% hike in the average cost of hotel rooms in Los Angeles County, overall hotel occupancy remained high last year, a sign that the region continued to be a strong magnet for tourism and business travel despite global financial turmoil, local officials said Wednesday.

The outlook for 1999, meanwhile, remains positive, as long as the economies of the U.S. and Europe remain strong and the financially battered Asian nations continue their recovery, analysts said.

In 1998, local hotels enjoyed an average occupancy rate of 74.41%, largely unchanged from 74.06% in 1997, according to PKF Consulting, which tracks the region’s hospitality industry. At the same time, hotel owners boosted daily room prices by an average of $8.56 from $99.34 in 1997.

Local tourism officials were heartened by the year-end results and said the numbers are significant because they indicate tourist demand for the region last year remained strong enough to keep occupancy rates steady despite the rising room rates.

Fueling the demand, said Michael Collins of the Los Angeles Convention & Visitors Bureau, were healthy economies in the United States, Canada and Europe, which helped create more discretionary income that was used by leisure travelers. Business travel was also high, he said, fed to a large degree by major events at the Los Angeles Convention Center.

“The demand for the market was sufficiently high to absorb the increase in rates,” Collins said. “It’s a classic supply-and-demand situation. It may be the same old story, but it’s a story we’re enjoying.”

And why not? In 1997, tourism was Los Angeles County’s third-largest industry, generating nearly $26 billion in revenue. The take for last year is expected to be even higher, Collins said, although exact figures won’t be available until spring or early summer.

Continued strong economic growth in North America and Europe, coupled with improvements in Asia’s battered economies, bode well for regional tourism this year, said Jack Kyser, chief economist of the Los Angeles Economic Development Corp.

“Unless everything goes down the drain economically, we will probably have another decent year,” he said.

Collins predicted occupancy will continue to inch up even as room prices move higher in 1999. “There’s a fundamental, healthy demand for what L.A. has to offer,” he said. “We’re looking at very strong, solid trends. I don’t see any indications that they’re going to change, barring any cataclysmic economic shifts.”

PKF Consulting also found that Long Beach posted the highest occupancy increase last year of any of the county’s 16 sub-markets. The coastal city logged a 7.7% jump in occupancy over 1997.

Judy Donley of the Long Beach Chamber of Commerce said the new Aquarium of the Pacific, with its giant octopuses, sharks and sea turtles, was largely responsible for the increase. “Obviously the Aquarium of the Pacific is the big new draw,” she said.

Meanwhile, the San Gabriel Valley suffered the largest drop in occupancy, falling 3.6%, largely due to a decline in business travel from Asia, said Bruce Ackerman, president of the San Gabriel Valley Economic Partnership.

In Pasadena, room rates grew more than anywhere else in the county, jumping more than 11% to an average of $133.46. Lynne Hess, president of the Pasadena Chamber of Commerce, said the increase was tied in part to major capital improvements at some of the city’s largest hotels.

She said increased interest in Pasadena among tourists also helped push the rates higher, and she expects more of an increase this year.

December and year-end figures for Orange County were not available Wednesday.

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Paying the Price

Demand for Southland hotel rooms has remained strong despite rising rates. A look at 1998 room and occupancy rates (with change from 1997 in parentheses):

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Area Room rate Occupancy Downtown $104.38 69.0% (+10.8%) (+4.2%) Hollywood $71.06 80.1% (+8.8%) (-0.3%) San Fernando $105.50 73.5% Valley (+6.4%) (+0.5%) Pasadena $133.46 73.2% (+11.6%) (-3.3%) San Gabriel $81.20 63.8% Valley (+4.5%) (-3.6%) Santa $160.75 80.9% Monica (+11.5%) (-2.3%) LAX $71.35 76.2% (+8.0%) (+0.6%) Long $89.13 70.6% Beach (+9.8%) (+7.7%) Valencia $80.10 76.7% (+0.7%) (-3.5%)

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Source: PKF Consulting