Next O.C. Hyatt, in Surf City, Is a Bet
Betting on an old-line city in a slowing economy, the owner of the Waterfront Hilton Beach Resort in Huntington Beach said Monday that it has started construction next door on a 519-room resort that would be one of Orange County’s 10 largest hotels.
The Robert Mayer Corp., in conjunction with Hyatt Corp., also said it landed permanent financing for what will be called the Hyatt Regency Grand Coast Resort, which would dwarf the 290-room Hilton.
Stephen K. Bone, chief executive of Robert Mayer, said the new hotel also will bring a missing amenity to a city long known for surfing and summer fun: convention room. It will have nearly 80,000 square feet of meeting space, including a conference center, an exhibition hall and a grand ballroom with an ocean view.
“This is what will make the resort truly unique,” Bone said. “Why go inland and be landlocked in Southern California when you can have meeting spaces right here, with ocean breezes and unobstructed views of the Pacific?”
Originally, the four-story resort was to carry the Hilton name, but Robert Mayer decided late last year to seek another upscale hotel banner instead because it would be too confusing to have two resorts under the same name, Bone said.
Affiliates of the Chicago-based Hyatt Corp. and Robert Mayer picked up permanent financing for the 15-acre project from GMAC Commercial Mortgage Corp. Construction of the $160-million hotel began last week.
Still, analysts said it is far from certain how a luxury hotel will fare in a city that has for two years dealt with bacteria-laden beaches and, most recently, leaky underground sewer pipes. Miles of Surf City’s coveted beaches, which attract 11 million visitors a year, have been closed on and off since 1999, when the worst sewage leak in Orange County history threatened the health of swimmers.
Last month, city officials admitted they failed to report massive, long-term underground sewage leaks found five years ago--adding further injury to Huntington Beach’s hard-earned vacationland image. And barely half a mile away, plans are being made to reactivate an old power plant to help the state get through its power crisis.
Add all that to the prospect of building a new hotel during an economic slowdown, and some analysts predict a weak debut.
“The best thing they have going for them is that this land is pretty much the last oceanfront hotel site in Southern California,” said Donald Wise of Wise Hotel Investments in Newport Beach. “There’s nothing else that’s terribly compelling near it, and it’s at a price point that’s way under the Ritz-Carlton [in Dana Point]. There’s a huge market that can’t afford the Ritz.”
Michael Branigan, also of Wise Hotel Investments, said the new hotel’s sprawling meeting spaces and oceanfront ballroom are also a unique touch that could draw visitors away from the Anaheim convention area inland.
“There’s not enough critical mass in Huntington Beach to build a full-blown convention center, so it sounds like they’re building the next best thing,” he said. “And if they do it right like they say they’re going to, the meeting rooms will really be unusual for this area.”
Hotel owners said they are unconcerned about building the project as the economy slows. The estimated completion date is October 2002--enough time, Bone said, to dodge the effects of any economic slowdown.
“I think our timing’s perfect,” he said. “I’d much rather build a hotel during a recession than open a hotel during one.”
Even the stretch of financial woes endured by the Hilton Waterfront between 1993 and 1995 does not overly concern Bone. “We recovered nicely, obviously, or we wouldn’t be moving forward with this project now.”
The property, stretching from the Hilton to Beach Boulevard along Pacific Coast Highway, has long been slated for a second hotel under the city’s redevelopment plan.
The city invested about $16 million in federal loans and other grants that helped pay for the removal of a mobile home park there, officials said. The new resort is expected to draw at least 150,000 visitors and return $4 million in taxes to city coffers each year.
“We’re excited because this is just what we need to move forward with our redevelopment plans to draw visitors and expand our image as a destination city,” said Huntington Beach spokesman Rich Barnard, noting that the city is also spending $7 million to renovate and improve its eight-mile stretch of beaches.
