Revitalized Anaheim Worries L.A. Officials

Los Angeles tourism officials are watching with a mixture of envy and fear as Anaheim gets ready to unveil a larger convention center and a revitalized tourist district that’s already pulling business south to Orange County.

More than $3 billion in state, city and Disney dollars have been poured into Anaheim over the last five years, funding everything from a wider freeway with sleek offramps that zip cars into the Disneyland resort to additional hotel rooms to a new companion theme park. All of it is set to open over the next two months.

“We are going to take it in the teeth,” said Michael Collins, executive vice president of the Los Angeles Convention & Visitors Bureau. “We just don’t know yet what the extent will be.”

That worries many downtown Los Angeles hotel managers, who, after a roaring summer capped by the Democratic National Convention, have seen occupancy rates slide beneath the 50% mark at year’s end.

“It’s going to be very tough for us to compete with what they have down there now,” said John Stoddard, general manager of the 900-room Wilshire Grand Hotel & Centre.

What’s worse, a slowing economy will make it harder to finance a new hotel adjacent to the Los Angeles Convention Center and a hoped-for entertainment complex--improvements that tourism officials say downtown L.A. needs to remain competitive with Anaheim and other areas.

Already, some of the conventions that Los Angeles won during the long remodeling that made the Anaheim Convention Center the largest on the West Coast are migrating back to Orange County, including the 55,000-visitor National Assn. of Music Merchants convention scheduled for Jan. 18-21.

The California Cable Television Assn., the only major convention in Los Angeles in November and December of this year, also plans to move its 21,000-visitor meeting back to Anaheim next year. In its remodeling, the Anaheim Convention Center grew by about 65%.

“The feedback is that some of these groups like our facility . . . but there weren’t enough hotel rooms and other things to do” in downtown Los Angeles, Stoddard said. “We have a lot of work to do.”

Anaheim’s transformation from a one-theme-park town into a glistening, palm-tree-lined, multi-destination resort with a state-of-the-art convention center threatens to inflict lasting economic damage on a downtown Los Angeles that has struggled for years to become more than a place to which people commute to work.

Cities fight ferociously for convention business, which can generate hundreds of thousands of hotel visits a year, stuffing municipal coffers with room and sales taxes. Collins estimates that the 502,000 overnight visitors to Los Angeles conventions this year accounted for about $200 million in direct spending.

The fight to land big conventions is what Collins calls a “zero sum game,” because there are only about 500 premier meetings annually.

“For a city to gain, it has to come out of someone else’s hide,” Collins said.

Because meetings are booked years in advance, the Los Angeles Convention Center has a good lineup for the next two years, Collins said. But after that, bookings drop off. The center has 34 conventions lined up for next year. That falls to 15 scheduled for 2003.

Jobs and income evaporate when the visitors disappear. Stoddard of the Wilshire Grand said the lack of meeting business in the last two months of this year--only one convention compared with five a year ago--has forced him to trim both staff and working hours.

Estimates of trends demonstrate how Anaheim is pulling ahead. After falling behind its competitor in the battle to fill hotel rooms in 1998, Anaheim will zoom ahead next year. The Anaheim center is scheduled to host 46 conventions, bringing in just under 600,000 visitors in 2001. Los Angeles, by comparison, will host 34 conventions, attracting roughly 550,000 visitors.

Tourism officials expect Anaheim’s new attractions to have a similar effect in the leisure travel business.

“Traditionally, there has been a symbiotic relationship between Anaheim and Los Angeles for leisure travel. They fed each other,” Collins said. “But the creation of the second [theme] park in Anaheim closes that by sequestering much of the pleasure-travel market to Anaheim.”

And it could get tougher for Los Angeles. Walt Disney Co. planners already are developing proposals for a third theme park in Anaheim. Its second, Disney’s California Adventure, adjacent to Disneyland, opens Feb. 8.

This new dynamic makes Los Angeles, even with its famous attractions such as Hollywood, Universal Studios and the Getty Center, more of a day trip, according to tourism officials from both cities.

The question for Los Angeles, they say, is whether it’s willing to fight back. The lack of a major headquarters-style hotel adjacent to the Los Angeles Convention Center is the biggest drag on winning new business, said Peter Anderson of PKF Consulting in Los Angeles, a hotel industry consulting firm.

Most other major convention centers have a large hotel--often 1,000 rooms or more--as part of the complex or within a short walk. These hotels serve as the base for convention organizers and industry officials and speakers attending a meeting.

The Anaheim center, for example, fronts onto both the 1,572-room Anaheim Hilton & Towers and the 1,033-room Anaheim Marriott Hotel.

In May, Staples Center owner Los Angeles Arena Co. proposed building a four-star, 1,200-room hotel next to the L.A. Convention Center. Local tourism officials hailed the proposal as a panacea for the center. But there’s a major hitch. Los Angeles Arena Co. said it would not fund what looks to be a more than $200-million building project without some public subsidy.

Ted Tanner, senior vice president of real estate for Los Angeles Arena Co., said other cities have provided funds for similar projects and that is often the only way to make the financing of such a development pencil out.

Already one candidate for Los Angeles mayor, City Councilman Joel Wachs, has voiced concern over putting public money into the project, which would be owned by Phil Anschutz and Ed Roski Jr., the owners of Staples Center, the Los Angeles Kings and other business ventures.

Proponents say financing could come from the tax revenue the hotel would generate. Though there is a City Council committee considering the project, most analysts expect little to be decided until after the mayor’s race next year. Even on a fast track, the hotel wouldn’t open for at least four to five years.

Regardless of what happens with the headquarters hotel, tourism officials say there’s no doubt that Los Angeles needs more hotels and more entertainment and shopping closer to the Convention Center.

There are only 650 hotel rooms within an easy walk of the Convention Center, according to Anderson of PKF Consulting. That compares with 7,750 rooms in Anaheim and 10,000 in San Francisco.

Moreover, there’s nothing in downtown L.A. that approaches the shopping and dining attractions near other convention halls. The Anaheim project includes Downtown Disney, 300,000 square feet of movie theaters, shopping and dining at such names as House of Blues, ESPNZone and, ironically, the renowned La Brea Bakery, named for the prominent Los Angeles street. When unveiling plans for their proposed hotel, the Staples owners also proposed an L.A. sports and entertainment district that would be built on land adjacent to the arena and would offer shopping and entertainment.

In the end, other changes in the makeup of downtown Los Angeles might attract more restaurant, hotel and housing projects, transforming the area into one that would be more attractive to convention planners and tourists.

“I think the absolute key is developing the residential base,” said Frank Lavey, general manager of the 500-room Hyatt Regency in Los Angeles. “That’s the only way to upgrade the retail offering and see expansion of the restaurants.”

Residents, rather than workers, would transform downtown Los Angeles into the type of 24-hour city that makes San Francisco and New York so attractive, helping the city to reassert itself as a destination, Lavey said.

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Tide Flows South

Projections show how Anaheim’s increased convention business will allow it to surpass its rival to the north in hotel room sales.

Source: Anaheim/Orange County Visitor & Convention Bureau, Los Angeles Convention & Visitors Bureau