Average O.C. Hotel Room Cracks $100

Orange County hotel room rates set a record last year, climbing above a daily average of $100 for the first time, while occupancy rates dipped to the lowest level since 1994, according to an industry report released Thursday.

Room rates have moved up about 20% in Orange County over the last two years, reflecting a market “that is getting more upscale,” said Bruce Baltin, senior vice president of PKF Consulting, a Los Angeles firm that tracks the region’s hospitality industry.

Rates have gone up steadily since 1994. In 1998, the average hotel room in the county cost $101.37, up 7.3% from $94.49 the previous year. Newport Beach had the county’s highest rates in 1998, with an average daily tab of $135.12. Prices were lowest in north Orange County, at $72.07.

In Los Angeles County, the average room rate was $107.90.

Meanwhile, occupancy rates at Orange County hotels dipped 4.4% to an average of 69.9% in 1998. Industry experts blamed the downturn on economic woes in Asia and ongoing construction in Anaheim, the county’s tourist magnet.

“Anaheim has a huge impact on Orange County,” Baltin said. “The decrease is reasonable in light of all the activity that’s going on.” Anaheim’s convention center is undergoing a major renovation. City roads are also undergoing reconstruction.

The healthy room rates in the face of lower occupancy rates show that the business downturn is “soft,” compared with previous industry setbacks, according to one local hotelier.

“Yes, occupancy is down,” said John Gilbert, general manager of the Hilton Waterfront Beach Resort in Huntington Beach. “Is it alarming? Yes. Is it seriously alarming? No. There are other strong economic indicators.”

Hotel managers were cautiously optimistic about the immediate future and downright cheery about how the industry will fare in 2001 and beyond, once the dust settles in Anaheim and Walt Disney Co. opens its new amusement park, California Adventure. Convention bookings, which are often made years in advance, are strong beginning in 2001, said Bill Snyder, executive director of the Anaheim Area Hotel Motel Assn.

While Disney’s expansion and the renovated convention center offer Anaheim a bright future, Snyder said, “in the short term, they’re causing some disruption.”

The construction work will pose a challenge to hotels throughout the county this year and next, experts say, as tour planners direct conventioneers and other travelers elsewhere. What’s more, folks in Kansas who are saving for that once-in-a-lifetime trip to Disneyland will likely want to wait until the new theme park opens in 2001, Baltin said.

“It’s going to be a continued effort to get people in there during the construction period,” he said.

Indeed, the local construction has posed more problems than the Asian economic crisis, said Baltin, who pointed to strong hotel occupancy rates in San Diego and Los Angeles counties.

“Within the three major markets of Southern California, it’s just Orange County that’s down,” he said.

With regard to occupancy rates, Anaheim took the biggest hit for the year, with a 5.4% decrease, while Newport Beach followed closely behind, dipping 5.2%. South Orange County took the softest punch, dropping just 0.9%.

For December only, occupancy rates fared better, dropping just 2.3% for the county. Anaheim made a comeback that month, recording a gain of 4.2%, apparently reflecting a successful holiday season promotion at Disneyland. In north Orange County, however, occupancy rates fell 9.7%.

Another industry indicator, hotel sales, also slowed last year in Orange County, according to a report released this week by the Atlas Hospitality group in Costa Mesa.

Only 26 hotels or motels were sold in 1998, compared with 31 the year before. And the combined value of last year’s deals was just $76 million, compared with $326 million in 1997. The 1997 figures were inflated by the sale of the Ritz-Carlton in Dana Point for $225 million.

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Different Directions

Pulled down by declines in Anaheim and Newport Beach, Orange County hotel occupancy dropped for the second consecutive year--the lowest level since 1994. Average daily room rates continued their upward movement:

Occupancy has dropped, while average daily rates have risen

*--*

Avg. Daily Occupancy Rate 1993 66.0% $77.80 1994 64.2% $75.36 1995 70.3% $79.32 1996 74.1% $84.56 1997 73.1% $94.49 1998 69.9% $101.37

*--*

****

Occupancy Changes, 1997-98

Anaheim: -5.4%

Airport area: -3.2%

North County: -4.0%

South County: -0.9%

Newport Beach: -5.2%

Source: PKF Consulting