Democratic Convention Proved Boon for O.C. Hotel Business Too

The surging economy and tourists avoiding the Democratic National Convention in Los Angeles made August a banner month for Orange County hotels, with Anaheim rebounding strongly from a year earlier, according to a new survey and interviews Monday.

Average hotel rates for the county rose about 8% for the month to $112, while occupancy was up 12% at 85%, according to PKF Consulting in Los Angeles. For the year, rates were up 5% to $111, and occupancy was more than 5% higher at 76%.

Expansions of Disneyland, the Convention Center and the freeway system had caused construction snarls that depressed Anaheim hotel results last year.

But business surged last summer with construction winding down, particularly at the large hotels near Disneyland and the convention hall. PKF estimated Anaheim occupancy levels jumped 18% over the prior year to top 85% in August.

“The consensus among Orange County hoteliers is it was the best summer ever,” said Donald Wise, president of Wise Hotel Investments in Corona del Mar. “Despite the fact that the new [Disney theme] park isn’t going to open until 2001, people kind of treated themselves and their kids last summer.”

Orange County hotels have seen improving results all year, benefiting from the healthy national economy and from improvements in the Far East, particularly Japan, PKF senior vice president Bruce Baltin said.

Fears that Los Angeles would be overcrowded because of the political convention added to the positive trends. While conventioneers drove room rates sky-high in Los Angeles, “tourists headed to Southern California last summer were more inclined to stay in Orange County” because of the convention, Baltin said.

Michael Branigan, a vice president at Wise’s firm, noted that Orange County hotels with more than 600 rooms saw occupancies soar from 64.6% a year earlier to 85.6% this past August, with average rates rising from $123 to $130 a night. The only hotels that large in the county are the Disneyland Hotel and the nearby Marriott and Hilton convention hotels in Anaheim.

“It was an awful year in 1999 for those big box hotels. This year, they really got their acts back together to draw that many people before the opening of Disney and the Convention Center,” Branigan said.

“That’s good marketing, and a very positive sign for the area.”

Only the Democrats, whose four-day national convention in mid-August brought more than 30,000 delegates, politicians and journalists to Los Angeles, could seemingly turn economic theory upside-down.

L.A. Room Rates Saw Olympic-Style Jump

Even though the average number of people renting rooms fell, 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 PKF monthly survey 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.”

Yet the average occupancy rate slid 9.3% to 62.6%, PKF reported.

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

Were conventioneers gouged?

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

Tourism officials were not surprised to see occupancy rates fall during the convention, considering the concern over mass protests and 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 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 filled 65% of its rooms last August but only 59% this August. However, the going rate was $122 this year, up from $102 per room a year ago.

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

Stoddard’s biggest disappointment?

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.

Big Conventions a Boon to Downtown Hotels

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 the the convention bureau. The Democratic convention, by comparison, generated 60,000 room nights, according to the latest estimates. That’s down from estimates of more than 70,000 made prior to the convention.

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, a level where developers will start considering building new hotels, Collins said.

Indeed, a survey of 800 hotel investors by Jones Lang LaSalle Hotels, a New York hospitality industry investment bank, found that Los Angeles and San Francisco are the two top U.S. cities for hotel investment. But most of the interest in Los Angeles was in buying existing properties, the investment bank said. Only 5% of the respondents said they were looking to build in the region.