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Hotel Development in Orange County, California All
But Dries Up; Handful of Small Hotels Opens,
Little Construction Under Way
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By Sandi Cain, June 2004 

While coastal resorts that opened last year still are creating a stir along the coast, few projects are under construction and several said to be in planning have languished there for more than five years.

Tight financial markets and uncertain tourist demand have worked to keep potential developers at bay. The lingering effects of the 2001 terrorist attacks and the economic downturn have continued to slow hotel development.

Only three hotels have opened in the county since Jan. 1, 2004, and the small handful under construction largely will serve growing business markets in places such as Foothill Ranch, Lake Forest and Cypress.

“There’s very little going on right now,” said Alan Reay, president of Costa Mesa-based Atlas Hospitality Group.

Reay said the lack of a downtown area in OC and the cost of development work hamper hotel growth.

“I don’t see any catalysts to spur development, unless it came from Disney,” Reay said. “There’d need to be a real upsurge in (hotel) rates to see that,” he said.

That upsurge has been slow in coming.

Last fall, PKF Consulting of Los Angeles forecasted OC room growth to be just 1.1% this year—about the same as the national forecasted growth of 1.2%. PKF also projected rates would rise by 2.1%. So far, those figures have proven to be on target.

As of April, Orange County’s overall average daily rate was $112.57, compared to $133.18 in San Diego and $121.03 in Los Angeles, according to PKF. That’s higher than the nationwide average daily rate of about $86, but up just 2.1% from 2003.

Average daily rate changes tend to lag occupancy increases in the early stages of market recovery, industry analysts say. As of April, Orange County’s occupancy was up 10.2% from the same period in 2003, indicating some promise for hotel developers in coming years.

New hotel openings in OC this year: a 127-room Days Inn & Suites in Anaheim; a 156-room Courtyard by Marriott in Foothill Ranch; and a 103-room Hilton Garden Inn at Lake Forest.
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Days Inn & Suites in Anaheim
2029 S. Harbor Blvd.
Anaheim, California
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Hotels under construction include a 122-room Extended Stay in Cypress and a 12-room expansion to the Balboa Inn in Newport Beach.

As is typical of the hotel industry during times of slow development, remodels and expansions are plentiful.

The Holiday Inn Express Hotel & Suites in Dana Point is putting the finishing touches on a remodel set for completion in July, while Four Seasons Newport Beach, Ritz-Carlton Laguna Niguel in Dana Point and the Newport Beach Marriott are adding spas.

Laguna Cliffs Marriott opened its spa earlier this year and the Westin South Coast Plaza has a health club in development.

Hyatt Regency Irvine will debut new restaurants by August. The Hyatt Newporter is in the final stages of a $10 million renovation. The Surf & Sand in Laguna Beach added a rooftop Catalina Terrace for events and the Disneyland Hotel is just beginning a renovation of its Grand Ballroom.

In addition, Costa Mesa-based Ayres Hotel Group plans to renovate seven of its existing hotels in the coming year, including those in Costa Mesa, Orange and Mission Viejo.

There are plenty of hotel projects waiting in the wings for market conditions to change. Of 19 listed by Atlas Hospitality as “in planning,” few are likely to be completed even in 2005.

Residence Inn at the Strand in Huntington Beach, a 150-room business hotel, still is in the permitting phase, while a 400-room boutique hotel in Huntington Beach is part of the 31-acre Pacific City development that just got the go-ahead from City Council early this month.

The Irvine Company’s Pelican Hill Inn would be unlikely to open before 2007, after its clubhouse is built, tentatively next year.

Some projects on the drawing board have languished for several years. Those include the Ritz-Carlton at Park Place, the Summit at Aliso Viejo and the three hotels proposed for the $600 million Garden Walk development in Anaheim, among others.

Other projects may be given new life. C.J. Segerstrom & Sons is said to be negotiating with the Mandarin Oriental Hotel Group to build a luxury hotel—with a condo component on the top floors—across from South Coast Plaza where the Edwards Town Centre theater previously operated.

The trend toward mixed-use residential and hotel properties, most recently seen in Southern California by the new Omni San Diego, is one that is expected to grow.

Along the coast, Montage Resort & Spa in Laguna Beach earlier this year bought the nearby Aliso Creek Inn. Plans for that hotel and golf course have not yet been announced.

A key element for hotel development is the availability of financing. On that front, there appears to be a light at the end of the tunnel.

Jim Butler, partner in Jeffer Mangels Butler & Marmaro LLP, a Los Angeles law firm specializing in the hospitality industry, said things are clearly on the upswing, based on reports from the firm’s recent “Meet the Money” hospitality finance conference held in May.

“It was the most upbeat conference in three years,” Butler said. “There was a lot of money chasing too few deals (at the conference),” he said.

Local hotel developers have turned their sights to other markets during the OC drought.

Irvine-based R.D. Olson Co. is under way with a $46 million expansion and renovation of Ojai Valley Inn & Spa that will add 63 suites, two restaurants, a dining room, an expanded lobby, a new golf pro shop, swimming pool and spa to that property.

Ayres Hotel Group just opened a 175-suite Ayres Hotel in Hawthorne a few miles south of Los Angeles International Airport and Costa Mesa-based Tarsadia Hotels has an agreement with Hard Rock Café International to develop and operate a new 250-room hotel in San Diego’s Gaslamp Quarter. The hotel is slated to open in summer 2006.

San Clemente-based Sunstone Hotel Investors Inc. this month opened its 196-room JW Marriott Hotel at Cherry Creek in Denver. Sunstone is the co-owner and operator of that hotel.

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Sandi Cain is a freelance writer and contributor to the Orange County Business Journal and meetings industry publications. She specializes in hospitality, tourism and travel. Cain holds bachelor’s and master’s degrees in education from Kent State University in Ohio, where she majored in social studies. A former high school teacher, she has written for niche-market sports publications in the U.S., England and Australia and formerly worked in both the printing and high-tech industries. A Cleveland, Ohio native, Cain hasbeen a resident of Laguna Beach since the late ’70s. She enjoys travel, gardening, reading and spoiling her three cats.
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Contact:
Sandi Cain
Laguna Beach CA
949-497-2680
scainado@earthlink.net

Also See The 6-year-old Orange County (California) Tourism Council May be Victim of Budget Cutbacks / Sandi Cain / June 2004
Long before Walt Disney Bought Land for Disneyland Park in the Early 1950s, Walter Knott Planted the Seeds of the Amusement Industry in Orange County, California / Sandi Cain / May 2004
Cities from Anaheim to Laguna Beach, Rife with New Resorts, Look to Grab Summer Business; Sunnier Outlook Ahead for Summer Travel Season / Sandi Cain / May 2004
Tony Bruno, VP and General Manager of Disneyland Resort Hotels, Maps Out 2004 Changes / Sandi Cain / March 2004
Disney Planning for Big Year in Anaheim Amid Board Drama / Sandi Cain / March 2004
Tourism Industry Rethinks Promotion on Security Issues Data / Sandi Cain / February 2004
Orange County’s 50 Largest Hotels with Meeting Rooms Report 3% Jump in Space in 2003 / Sandi Cain / January 2004
Tale of Two Converntions; Las Vegas Versus Anaheim: Trade Groups Take Opposite Tack in Convention Plans / Sandi Cain / January 2004
Meeting Bookers Optimistic 2004 Will Mark Rebound Despite Potential Hurdles; Attendance Boosts at Recent Conventions Have Made Orange County California Hoteliers Hopeful / Sandi Cain / January 2004
Hotels, Theme Parks in Orange County, California Start Aggressive Push for In-State Visitors During Holidays / Sandi Cain / November 2003
An Oranges to Oranges Comparison; Anaheim and Orlando Share Tourism and Meeting Destination Bent, Differ in Some Areas / Sandi Cain / August 2003
New Coastal Resorts Helped Orange County, California Post Gain in Hotel Rooms / Sandi Cain / August 2003
Orange County California Hotel Building Remains Sluggish; Bright Spot: the Burgeoning Resort Market along OC’s Pacific Coast / Sandi Cain / July 2003
Sunstone Hotel Investors LLC and Tarsadia Hotels Expanding by Going After Weaker Hotels in Key Markets / Sandi Cain / June 2003
Orange County's Travel Agencies Continue to Suffer from a Downturn in Travel / Sandi Cain / May 2003
Hoteliers Worry as War, Economy Hit Bookings; A Weak Tourism Industry Threatens to Get Weaker / Sandi Cain / April 2003
Budget Ax Threatens Orange County's Tourism Comeback / Sandi Cain / February 2003
Pacific Islandia California Inc., Owner of the 489-room Sheraton Anaheim Hotel, Files for Bankruptcy Protection; Bankruptcy Over Dispute, Not Results / Sandi Cain / February 2003
Security Detail; High-Profile Meetings Have Police on Special Alert / Sandi Cain / January 2003
New Hotels, Remodelings Spur Growth in Orange County Meeting Space Amid Slow Recovery / Sandi Cain / January 2003
Security Detail; High-Profile Meetings Have Police on Special Alert / Sandi Cain - January 2003
Tarsadia Hotels Building Residence Inns in Garden Grove, San Diego, Buys the 201-room Crowne Plaza in Las Vegas / Sandi Cain / Dec 2002
Bucking Convention - Anaheim Center Expansion Seems to Pay Off as Other Cities Struggle / Sandi Cain / Nov 2002
Ayres Breaks Ground on L.A. Hotel, Expanding Two Others / Sandi Cain / Oct 2002
Orange County California's Hotels, Convention Center Upbeat Despite New Competition and Weak Economy / Sandi Cain / Aug 2002
Ritz, Surf & Sand, Vie With Beach Resort Newcomers Along California's Orange County Coast; Almost 1,000 rooms Set to be Added / Sandi Cain / Aug 2002
Orange County California's Hotels, Convention Center Upbeat Despite New Competition and Weak Economy / Sandi Cain / Aug 2002
Montage Founder, Alan J. Fuerstman Sees Big Things for Laguna Colony Luxury Hotel, Acquired from Marriott International for $190 million / Sandi Cain / July 2002
Orange County’s $6 billion Annual Tourism Industry Shaking off the Downturn / Sandi Cain / May 2002
The Orange Riviera - New Luxury Hotels and Renovation Projects Transforming OC’s Coast / Sandi Cain / May 2001 
Orange County Hoteliers Hope for a Solid Summer Season to Regain Momentum / May 2002 / Sandi Cain
Hotel Brokers: From Sales to Consultants / Sandi Cain / Jan 2002 
Tourism Officials Focus on Security of Events and Sites as Key to Attracting Visitors / Sandi Cain / Jan 2002 
Orange County Travel Agencies Bear Brunt Last Week, Waiting For Fallout / Sandi Cain / Sept 2001 
St. Regis Monarch Beach Resort & Spa Opening Adds to Competition in South Orange County California / Sandi Cain / Aug 2001 
The Orange Riviera - New Luxury Hotels and Renovation Projects Transforming OC’s Coast / Sandi Cain / May 2001 
Ayres Hotel Group Expands, Rebrands / Sandi Cain / March 2001
Orange County’s Hoteliers Relieved as Anaheim Convention Center Expansion Boosted Occupancy and Rates During Past Year / Sandi Cain / May 2001
Indomitable Disney / Bad News Doesn’t Tarnish the Mouse; Slowing Economy Another Matter /  / Feb 2001 
Orange County Hotels Poised for Meetings Growth; Newcomers Help Bolster Total Space; Disneyland Hotel Still No. 1 / Sandi Cain / Jan 2001 


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