Hotel Rates Up, Occupancy Down During Convention

The Democratic Party, whose four-day national convention brought more than 30,000 delegates, politicians and journalists to Los Angeles in mid-August, seemingly turned economic theory upside down.

Rates of hotel rooms in Los Angeles zoomed to unprecedented levels during the Democratic National Convention, perhaps providing Republican presidential candidate George W. Bush with new ammunition to paint Democrats as a party of big spenders.

And in defiance of the traditional laws of supply and demand, hotel rates rose even though the number of people renting rooms in August fell. The average occupancy rate slid 9.3% to 62.6%, according to statistics released Monday.

The average price of a hotel room in downtown Los Angeles soared to a record $134.87 in August, up 28.6% from August 1999, according to a monthly survey conducted by PKF Consulting for the Los Angeles Convention & Visitors Bureau. The only time rooms took a larger jump was in August 1984, during the Olympic Games, when they rose 50%.

“The DNC most certainly paid its way,” said Michael Collins, the bureau’s executive vice president. “No other single event could have driven such a bounce.”

“A lot of hotels made a lot of money,” he said.

Were conventioneers gouged?

No, said Collins, noting that the rates were negotiated by the Democratic National Convention Committee with hotel operators more than a year in advance.

Tourism officials were not surprised to see occupancy rates fall during the convention, given the preconvention concerns about massive protests and possibly violence. Though such disruptions never developed, tourists and business travelers stayed clear, choosing other destinations or staying in outlying areas.

But hotel operators in the downtown area aren’t complaining. The high rates they collected from convention-goers turned August into a good month in what’s turning out to be a good year.

“Everybody did pretty well,” said John Stoddard, vice president and general manager of the 900-room Wilshire Grand Hotel & Centre.

“The Democrats spent a lot of money, especially for banquets,” Stoddard said.

His August balance sheet illustrates how fewer rooms added up to more dollars. The Wilshire Grand, near the Convention Center, filled 65% of its rooms in August 1999 but only 59% this August. However, a year ago, the hotel collected only $102 per room. The going rate this year was $122.

The end result: The hotel pulled in revenue of $3.7 million this August compared with $3.2 million last August, almost a 16% increase. Part of the increase was a banquet tab of $325,000 above last year.

Democrats might be left of Republicans politically, but they won lots of points for family values. Bar tabs were flat at best, even though the Wilshire Grand had just opened a new $2-million bar.

“I expected the restaurant and bar business to do much better,” Stoddard said.

Other parts of Los Angeles benefited from strong room rates and an increase in occupancy rates. Hotels in Hollywood, for example, collected average rates of $96.84 per night in August, a 20% jump from August 1999. Occupancy rates rose 11.7% to just shy of 90%. West Hollywood also posted nearly a 20% jump in room rates though its occupancy was level with last year.

Overall, Los Angeles County average room rates rose 14.8% to $131.38. The occupancy level edged up to 81.3% from 78.9%.

Although occupancy and room rates in the downtown area are falling back into a more traditional balance, the fall is turning out to be just as busy as the summer, Stoddard said.

“We will have our highest occupancy rate of this year this month,” he said.

Downtown hotels are benefiting from a series of large business conventions, some of which are nearly as large as the Democratic Convention.

The PeopleSoft convention starting Monday is expected to draw 15,000 attendees and generate between 50,000 and 60,000 room nights at local hotels, according to the convention bureau. The Democratic Convention, by comparison, generated 60,000 room nights, according to the latest estimates.

For the year, Los Angeles County hotels have seen rates rise 6.7% to an average $122.53. Occupancy has risen to 77.7% from 75%.

Several areas--including Santa Monica, Marina del Rey and the South Bay--have seen occupancy rise well into the 80% range this year.

Orange County average hotel rates rose 7.8% for August to $111.56. Occupancy rose 12.3% to 84.9%. For the year, rates are up 5.1% to $110.69. Occupancy countywide is up 5.3% to 76%.