O.C. Hotels Defy Regional Falloff in Vacancy Rates
Despite a drop-off of visitors at high-end hotels throughout the region, Anaheim’s strong convention traffic and the Disneyland Resort expansion helped boost Orange County’s overall hotel occupancy in the first three months of the year.
A survey of 75 Orange County properties found an overall occupancy rate of almost 72% in the first quarter--up 2% from the same period a year earlier, according to a report by PKF Consulting, the lodging research firm in Los Angeles.
“The construction is finally finished, and we can now reap the rewards,” said Bill Snyder, executive director of the Anaheim Area Hotel Motel Assn. “I’d say the [latest occupancy figures] are on target with what we expected. We’re certainly doing our part in carrying the county, and that feels good.”
By contrast, overall hotel occupancy dropped slightly in Los Angeles County, as the national economic decline curtailed business and leisure travel. Hardest hit were pricier hotels in places like Santa Monica and Pasadena.
PKF officials said they were surprised by the downturn in Los Angeles County, and tourism officials Wednesday cautioned that PKF’s report may be an indication of lower occupancy throughout the Southland into the summer.
“We originally anticipated overall occupancy to be up in the first quarter,” said Rick Frolich, a PKF analyst, speaking about Los Angeles County’s decline. “But January was flat, February was down and then March dropped down a little more. Based on this report, we’re now expecting slower travel for the second quarter as well.”
Although Orange County’s overall rate bucked the trend--thanks to many of the 22 hotels surveyed in the Anaheim area--the priciest hotels in the county didn’t dodge the slowdown.
A separate breakdown of hotels in Newport Beach showed average occupancy falling 4% in the first quarter--and by a whopping 11% in the month of March. Even so, room prices in that area pushed 5% higher, to $154 a night during the quarter.
The average daily room rates in Anaheim jumped by an even bigger percentage in the January-March period, to almost $123 a night. But that followed more than two years of falling room prices because of construction around the Disneyland Resort.
Overall, hotels in the Anaheim area saw a healthy 4% increase in the number of rooms filled each night during the first quarter, according to PKF’s report. And that percentage gain held up in March as well.
“We’re feeling really very good,” said Edd Karlan, a spokesman for Anaheim Hilton and Towers. “March was an absolute windfall for us, mostly due to the conventions, and now we’re finally seeing the leisure market pick up over here too. We’re predicting a strong, healthy second quarter.”
Such optimism may be behind the big 7% gain in the average cost of a one-night stay in Orange County, to just about $121. That percentage increase was almost double the first-quarter increase in Los Angeles County, where the one-night stay averaged about $127.
James T. Kelly, a hotel consultant in Newport Beach, said the rising vacancy levels in the region were not likely to last much longer, noting that first-quarter occupancy figures are generally lower than the rest of the year.
“I don’t believe the decreases we’ve seen are anywhere near what we originally feared,” Kelly said. “There are still people going after their weekend getaways, even high-end ones.”
But the latest PKF survey suggested more consumers were holding back.
In Los Angeles County, the pricier markets in Pasadena, Santa Monica and Marina del Rey--where nightly rates run $150 and up--saw occupancy drops between 7% and 9% from last year’s first quarter. Among the county’s 162 hotel properties polled, overall occupancy fell 0.5% for the quarter, but in March alone, the rate dropped more than 2%.
PKF’s Frolich now predicts that overall hotel occupancy in Los Angeles County will drop 1% this year. The average daily room rate is expected to climb to $129.
Occupancy rates are being most affected by a cutback in business travel, experts said. Companies--more so than tourists--are usually first to respond to economic uncertainties, said Nancy Sidhu of the Los Angeles Economic Development Corp. But Sidhu also pointed to another potential problem for hotels and other tourist businesses this summer: the state’s energy crisis.
“When it comes to travel trends, it’s going to be difficult to disentangle the electricity problems from the economic worries,” the economist said. “And since neither looks very promising at this point, I would say hotel occupancy rates will be as bad or perhaps worse in the next few months.”
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Hotels Feel the Slowdown
The slowing economy meant fewer patrons at hotels in most of Los Angeles County, especially pricier areas. But Orange County got a boost from the expanded Anaheim Convention Center and Disneyland Resort.
Change in hotel occupancy rate, from first quarter 2000:
Source: PKF Consulting
