San Diego, O.C. to See Hotel Growth

Southern California’s hotel industry will continue to recover next year from the lingering travel downturn, but at a more modest pace than previously expected because of a chilled economy, a stubborn corporate travel slump and an influx of new, high-end resorts, according to a report scheduled to be released today.

Occupancy rates at Los Angeles County hotels are expected to be flat in 2003, and average room rates will decline 3% next year -- the worst in the region -- because of poor convention business, a 15% drop in international visitors and an unemployment rate that has crept back to 1998 levels. The forecast, prepared by PKF Consulting, projects occupancy in Los Angeles next year at 65.3%.

Bruce Baltin, a lodging expert with PKF Consulting who will present the report at a tourism outlook conference today in Long Beach, said L.A. hotels have found it difficult to raise room rates without driving away customers.

The average daily room rate in L.A. County is $117, down from $121 last year. Rates are expected to be flat in 2003.

“Many of us thought Los Angeles and Southern California overall would recover more quickly than it has this year,” Baltin said. “But the industry is really taking its time coming back. At this rate we won’t be anywhere near 2000 levels for at least another year or more.”

Orange County’s hotel occupancy is expected to average 66.3% next year, up from 64% this year. Anaheim, with its strong convention calendar and rebounding leisure market, stands to see the highest boost in occupancy and room rates in 2003 -- to 66.4% and $90.50, respectively.

San Diego County, however, continues to be the second-strongest hotel market in the country behind New York because of a newly expanded convention center and strong drive-in market, Baltin said. Occupancy is expected to average 73% next year, up from 71.5% this year, while average room rates will rise more than 3% to $137.

“San Diego has been sitting pretty and is in a great position for growth next year,” Baltin said, noting the Super Bowl in January and the development of a downtown ballpark for the San Diego Padres in 2003.

Representatives of Beverly Hills-based Hilton Hotels Corp. said the report’s findings are in line with what they project next year at the company’s 55 properties in Southern California.

In San Diego, for example, Hilton’s hotels have seen a nearly 80% occupancy rate this year, said Dieter Huckestein, vice president of hotel operations. And though prices have been softer this year, Huckestein expects room rates to stabilize in 2003 as the travel industry continues its recovery.

“I see an incremental, modest increase in our Southern California properties next year,” he said. “The further we move away from the effects of [Sept. 11], and the more we take advantage of the region’s vast drive-in market, the better off we’ll be.”