News for the Hospitality Executive
|By Steve Johnson, San Jose Mercury News, Calif.
Knight Ridder/Tribune Business News
Feb. 23, 2004 - It's enough to make a hotel manager weep.
At a dozen major hotels that depend heavily on the San Jose McEnery Convention Center for customers, just 37 percent of their rooms -- barely more than a third -- were rented in December.
Although San Jose Convention and Visitors Bureau data goes back only to 1999, that's undoubtedly the worst monthly occupancy rate at the city's convention-oriented hotels in at least 10 years, according to the bureau's chief executive, Daniel Fenton.
"We're all disturbed over that number," he said.
Nonetheless, Fenton and hotel executives expressed confidence that the market is rebounding, in part because of increased efforts to lure convention groups not linked to economically distressed high-tech industries.
"My feeling is that we've reached the bottom of the wave last year and that things are looking up for us," said Cyril Isnard, the Fairmont's general manager. "We have seen a large increase in the last four months of individual travelers and that's the first indication I get which leads me to be optimistic." In addition, Isnard said, more groups are booking rooms at his and other hotels, and there has been an upsurge in weddings, company celebrations and other events at the Fairmont.
"We definitely have reason to be optimistic," said Clifton Clark, general manager at the San Jose Marriott, which opened next to the convention center in April. "I really feel good about the fact that our convention and visitors bureau is very focused and going after markets that have not been pursued nearly as much in the past few years." Indeed, technology-related business accounted for just 26 percent of convention center bookings in fiscal 2003, compared with 60 percent in fiscal 2002, according to the convention bureau.
Groups reserving convention space recently include the Society of Black Physicists, the California Association of School Business Officials, the American Public Transportation Association and the Society of Mexican American Engineers and Scientists.
Still, it will take some doing to bring convention business back to what it was during Silicon Valley's boom. The convention center drew 144,710 people in 2003, less than half the number of attendees in 2000.
To lure more business, the center last fall dropped the amount it charges groups to rent space by 25 percent. That's the first time the rate has been slashed and it appears to be working, according to Marit Hansen, the center's director of sales and marketing. Since the decrease, she said, bookings "have been steadily going up." Hotel occupancy levels are typically lowest at the end of the year, when business travel slackens. Even so, the 37 percent rate in December is well below the 58 percent recorded in December 2000.
It's also well below the city-wide average for any month in San Jose, Oakland and San Francisco since at least 1989, according to Gary Carr, a spokesman for PKF Consulting, which tracks hotel trends.
Including all hotels, PKF reported Thursday, the average occupancy rate in December was 43 percent in Silicon Valley, 56 percent in San Francisco and 43 percent in Alameda and Contra Costa counties.
Lower occupancy rates typically mean lower room rates, which is great for consumers, but a headache for hotel managers. The average room at San Jose convention-oriented hotels cost $103.22 in December last year. That's a 38 percent plunge from December 2000 when it was $166.03.
So despite signs of improvement, it's still a tough time for hotels.
"In the short term," said John Southwell, general manager at the Hilton San Jose & Towers, "we're all scrambling for business."
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(c) 2004, San Jose Mercury News, Calif. Distributed by Knight Ridder/Tribune Business News. HLT, MAR, FHR,