Hotel Occupancy Rates Fall Sharply

Hotels across California--particularly convention and business properties in Anaheim and San Francisco--suffered the lowest occupancy rates in a decade in the aftermath of the mid-September terrorist attacks, according to a survey released Monday.

Occupancy rates in both San Francisco and Anaheim plunged by about half compared with last year’s levels to about 42% for the week ended Sept. 22, according to an analysis by Ernst & Young Hospitality Group.

Los Angeles also incurred a steep decline, with occupancy rates dropping by about one-third to 53%.

San Francisco and Anaheim suffered more because the terrorist attacks and subsequent plunge in travel came during the busy convention and meeting season. Los Angeles, in contrast, does not book as many big meetings and group events in September, according to Ernest & Young industry consultant Jeffrey Dallas.

The steep drop in travel compounded problems in San Francisco, where hoteliers already had seen demand slacken as a result of the dot-com downturn and cutbacks in the technology and telecommunications industries. San Francisco hotels reported a stunning 69.3% drop in revenue per available room--a key measure of hotel operating performance--compared with last year.

San Francisco hotels might take longer to recover than those in Southern California because the city is much more dependent on long-distance business and leisure guests who travel by plane, Dallas said. Anaheim and Los Angeles, in contrast, are better positioned to take advantage of more regional business and auto travel.

“Their pace [of recovery] will lag behind Los Angeles, Anaheim and San Diego,” Dallas said.

Dallas and other industry observers anticipate that business travel will rebound much more quickly than leisure travel, which is more discretionary in nature. Despite a high number of cancellations in September, most major business and group conventions scheduled for the remainder of the year still are expected to take place, according to industry observers.

The state’s hotel occupancy and revenue are expected to have improved since the Ernst & Young report was conducted.

Occupancy rates and revenue are expected to keep rising, Dallas said, “but no one expects them to return to normal levels in the next few weeks.”