Tourist-Centric Anaheim Finds Itself ‘Devastated’ by Terror’s Shock Waves

Few cities in America have staked as much on tourism in recent years as Anaheim, but the West Coast’s biggest convention center and home to Disneyland has been staggering since the terrorist attacks. Its financial outlook looks even more shaky in some ways than tourist meccas such as Las Vegas or Orlando, Fla.

The city was jolted Wednesday when its bonds--along with Hawaii and the Washington convention center--were placed on “credit watch” for a possible downgrade by Standard & Poor’s. The rating agency said Anaheim and Hawaii were particularly vulnerable because their budgets are heavily dependent on tourist spending.

“We have been devastated in Anaheim,” said Ada Torres, president of the Hotel Employees and Restaurant Employees Union Local 681 in Anaheim. “We have no idea what we’re going to do. The people . . . just aren’t coming here anymore. It’s horrible.”

Thousands of jobs are on the line. Roughly 15% of the private work force in Anaheim rely directly on tourism for their jobs--double the share for the state, according to government estimates. Half of the city’s top 10 employers are in the tourism industry.

Standard & Poor’s specifically chose not to review bonds issued by Las Vegas, surrounding Clark County and Nevada, saying business appeared to be coming back gradually. Nor is Orlando under review. Both Las Vegas and Orlando have stronger reserves to make up any revenue shortfalls.

Hawaii’s tourism-dependent economy has been hit especially hard since Sept. 11, with many of its beaches deserted by Japanese tourists. And while passenger loads to Hawaii have improved, the state is getting about 70% to 80% of the normal U.S. visitors and just 50% of the typical number of Japanese tourists, state officials said Wednesday.

Hawaii generated 46% of its general funds last year from hotel room taxes and sales taxes.

“We understand S&P; is being very cautious about this, but we believe it’s premature to do this,” said Neal Miyahira, finance director for the state. “For us, we did have an impact. But the good thing is that flights, both international and domestic, are back to very much the same levels.”

In the nation’s capital, the Washington Convention Center Authority figures that the reopening today of Ronald Reagan Washington National Airport, even on a limited basis, will help to bring tourists back. No convention customer has canceled any events, said spokesman Tony Robinson, and business and government meetings are drawing about 2.5 million people on an annualized basis into town. But tourism, he acknowledged, brings in far more people.

The credit watch for Anaheim covers only $8.5 million in general obligation bonds, but a downgrade could make future borrowings costly. And Anaheim’s predicament underscores how the terrorist attacks have intensified risks for a city that had envisioned a prosperous future as a major tourist destination.

S&P; pointed out that Disneyland plays a prominent economic role in the city as a leading taxpayer and the largest employer. Walt Disney Co., though, was recently placed on CreditWatch with negative implications.

Anaheim has other tourism, recreation and travel venues including the convention center, Anaheim Stadium and Arrowhead Pond, each of which contribute to the city’s hotel room taxes and sales taxes.

Anaheim “made this major investment, and it all came on-line in difficult times,” said Howard Roth, principal economist with the California Department of Finance. “They’ve just been unlucky in a number of ways.”

This was to be Anaheim’s big debut after spending $4.2 billion in public and private money to build a second Disney theme park, a glitzy retail district and new hotels. The city’s convention center also was remade and enlarged to become the eighth-biggest in the nation, based on exhibit space.

But in the days after the attacks, at least seven conventions with 35,000 attendees canceled. When all is said and done, Anaheim Visitor & Convention Bureau President Charles Ahlers estimates that as many as 150,000 anticipated convention visitors may not show up, costing the city and businesses more than $200 million.

By comparison, the Las Vegas Convention and Visitors Authority said Wednesday that to date, it has lost $98.7 million from cancellations that would have brought 78,710 visitors.

As in Vegas, numerous foreign tourists have canceled trips that included visits to Disneyland and Anaheim.

“Every day I ask the hotels, ‘Are people coming back?’ ” said Sam Kharbanda, whose photo business on Harbor Boulevard has been decimated. “But nobody can tell,” he said. “It’s scary.”

Mayor Tom Daly, who has overseen Anaheim’s remake into a tourist destination, said his city has solid reserves. “Our day-to-day operations and the day-to-day services that Anaheim provides are in fine shape,” he said.

But Anaheim, a city of 328,000 with an annual budget approaching $1 billion, has unofficially implemented a hiring freeze. And Daly himself has been calling convention groups, one by one, just to make sure they’re coming.

City officials predict that the worst will be over soon. The convention center is still booking events, they said, and has 214 already confirmed for 2002, which, if everyone came, would bring more than 800,000 visitors pumping a projected $1.1 billion into the local economy.

Ahlers, Anaheim’s Visitor & Convention Bureau president, isn’t taking any chances. He recently gathered his crew and told them that there would be an immediate hiring freeze, budget cuts of 15%, and he directed his sales staff to call “everybody everywhere” to drum up business.

“If we don’t do anything to promote ourselves, it’s going to erode even further,” he said.

Disney, by far Anaheim’s biggest private employer, isn’t sitting still either. Although attendance has crept higher in recent days, its new theme park, California Adventure, was struggling even before the terrorist attacks.

The Disneyland Resort, which includes the original Disneyland, the city’s biggest draw, is launching a new marketing campaign in areas west of Denver with a message that emphasizes spending time with loved ones at “a place for escape.”

Hotels in Anaheim also are banding together to promote specials, after occupancy rates--which had been one of the fastest growing in the nation--fell to just 35% in the week after the terrorist attacks. In hotel bed taxes and sales alone, the city projected to net more than $123 million, accounting for more than half the general fund revenue.

Frederik Kluvers, general manager of the Radisson Hotel Maingate, said he was reducing room rates as much as $50 per night, throwing in free extended nights and free meals for kids--anything, he said, “to lure people back to Anaheim.”

Many workers already have had their work hours slashed and some have been laid off. Things have gotten so bad for hotel workers that a local union is holding food drives for its members.

City officials say Anaheim will be cushioned somewhat by the fact that 80% of Disneyland’s visitors live within driving distance of the resort. And as Anaheim redirects its marketing to more regional tourists and convention-goers--currently half are local and half out of state--the city may be able to boost its tourist count.

But competition for the “drive-in” crowd will be fierce. Many areas in California, including San Francisco, are targeting Southern Californians. Las Vegas is planning to spend $13 million in marketing to Southern California and others primarily in the West. Their message: the Frank Sinatra song, “It’s Time for You.”

“Anaheim wanted to be a major competitor in the global market, not just the local one,” said Joseph Lee, and advisor with the consulting firm KPMG LLP. “And now they’re going to find themselves chasing the same things everyone else is chasing. It’s a whole new game.”

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Staff writer James S. Granelli contributed to this report.