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The San Francisco Bay Area Hotels Are Displaying the "No Vacancy"
 More Frequently, However, Not So for "Help Wanted"

By George Avalos, Contra Costa Times, Walnut Creek, Calif.
Knight Ridder/Tribune Business News

Jun. 18, 2006 - East Bay hotel managers display the "no vacancy" sign more often these days, but the "help wanted" sign seems likely to stay tucked away.

The Bay Area hotel industry has turned the corner and is headed for better times. More rooms get filled more often. Room rates have edged a bit higher.

That's in sharp contrast to the woes of recent years, when the industry languished in the doldrums.

The Sept. 11, 2001, terrorist attacks compounded a regional and nationwide malaise for the lodging industry that began with the dot-com meltdown. Business and leisure travelers scuttled their trips, so rooms went begging, managers were forced to chop rates, and hotels jettisoned jobs.

"Our occupancy levels are up from last year, but we are not up to the pre-9/11 levels," said Ron MacConnell, general manager of the Four Points by Sheraton hotel in Pleasanton.

Other hotel managers agree that while business is up, it could be much better, especially considering the very good days of the dot-com bubble.

"Demand is up, and more people are traveling to the Bay Area," said Mark Everton, general manager of the Oakland Marriott City Center, which, at 484 rooms, is the East Bay's largest hotel. "But we still don't have as much profit per room as before 9/11."

The overall upswing in business has yet to translate into many more jobs, according to managers, union officials, and data from the state Employment Development Department.

"Hotels are busy, and they are making more money, but they don't have the same staffing they had before 9/11," said Amanda Cooper, a spokeswoman for UniteHere, a union that represents hotel and restaurant workers. "They have the same number of employees who are working harder."

Jobs in the accommodations industry as of April were still below the levels of five years ago in the East Bay, South Bay and San Francisco-San Mateo-Marin area, according to a Times analysis of the EDD jobs database.

"These hotels cut staff, they lay people off when business drops in order to regain profit margins," said Mike Casey, president of Local 2 of UniteHere, which represents workers in the San Francisco area. "Then at the same time, as things start to come back, they jack up room rates as occupancy rises. But they do not increase staffing levels."

That is what has happened with lodging jobs in the Bay Area. While room rates and occupancy levels have risen in recent years, jobs have been slower to respond. East Bay lodging outlets still have 11 percent fewer jobs than they did in April 2001, South Bay hotels have 13 percent fewer, and San Francisco inns have 4 percent fewer.

The employment outlook has not brightened all that much in the past year. During the 12 months that ended in April, lodging jobs in the East Bay were down 1.5 percent, marking four straight years of annual job losses in that sector of the employment market.

Industry job trends are barely better elsewhere in the region. The number of accommodations jobs in San Francisco and the South Bay were unchanged over the last year, according to EDD data.

Despite waning employment, hotels apparently are making more money. The pace of improvement in hotel occupancy levels and daily room rates can bolster the arguments made both by hotel managers who seek to nurture profits and union leaders who press for better wages and more jobs.

Over the past five years, occupancy levels for Bay Area hotels were down 4.2 percent and average room rates were down 16.5 percent. In the East Bay, occupancy levels and average room rates were both down roughly 12 percent, according to data supplied by Smith Travel Research.

Those numbers have improved in the past year. In the 12 months, Bay Area occupancy rates are up by more than 7 percent, average room rates by 9 percent. In the East Bay, occupancy rates rose by nearly 7 percent and average daily room rates by more than 5 percent.

While good news for hotels, it's been hard for managers to nudge room rates much higher, said Victor Patel, general manager of the Hampton Inn, an 80-room facility in Livermore.

"We have been trying to raise rates, but every time we do, there is a lot of resistance," Patel said. "Occupancy will have to go higher to get rates higher. Business is a little better this year than last, but while occupancy is up, our daily rates are about the same."

East Bay hotels also must overcome another obstacle: tourist demand.

Even with its eclectic waterfront and bucolic wine country, the East Bay generally is not considered a major tourist attraction, compared with nearby San Francisco, Monterey Peninsula, Pacific coast or the Napa Valley. As a result, East Bay hotels cater mostly to business travelers, corporate groups and professional or association meetings.

An informal survey of hotel visitors in the East Bay suggested they would be unlikely to stay in Alameda or Contra Costa counties if they were on a tourist trip to Northern California.

"I would stay in Monterey or San Diego, someplace that's a tourist destination," said Bob Stuntebeck, a Wyoming resident who was in the East Bay last week on the business trip. "I would want to be close to where I was visiting."

Kirk Lomker of Minnesota, staying overnight at the Concord Hilton, also was in town on business. He has stayed at the hotel at least twice before, always for business.

"If I were here for pleasure, I would stay in San Francisco or Napa," he said.

Still, some hotels attempt to position themselves as convenient springboards to reach other areas.

"We are fairly close to San Francisco, fairly close to Napa, so you could stay here to get to various parts of the Bay Area," said David Cantando, general manager of the 329-room Concord Hilton. "You could use this hotel and the other hotels in the East Bay as a kind of base to easily drive to other attractions."

Nevertheless, the East Bay greatly depends on a bustling hotel market in San Francisco and Silicon Valley for its own success.

"When San Francisco is full, then the East Bay does extremely well," Everton said. "When San Francisco is open and cutting its rates, it is hard for the East Bay to realize any gains in rates."

And hotels in the eastern parts of the East Bay -- Pleasanton, San Ramon and Livermore -- that are even more removed from San Francisco than Oakland, Walnut Creek, or Concord, find it tougher to bathe in the San Francisco overflow.

Plus, San Francisco itself has not fully recovered back to the dot-com heyday. That is one reason why occupancy levels and room rates have recovered more quickly in San Francisco and the South Bay than in the East Bay.

Still, the hotel industry in the Bay Area is looking pretty healthy these days.

"There is increased demand for hotels because of the economic recovery," said Margaret Lyeth, a consultant with PKF Consulting, a San Francisco firm that tracks the hospitality and other industries. "Jobs are up, office space is being absorbed, spending is up in the technology field, leisure travel is improved. The industry is on its way back."

And that improvement might just be in the early stages, said Brad Garner, a vice president with Smith Travel Research, which compiles industry data.

"We're very bullish on the industry," Garner said. "This recovery is only in the second, third, or fourth inning of an nine-inning game, maybe a game that will go into extra innings. We see strength well into 2009."

George Avalos covers the economy, financial markets, insurance and banks. You can reach him at 925-977-8477 or gavalos@cctimes.com.

HOT AND COLD

Some sectors of the East Bay's leisure and hospitality industry have been hot, while others remain cold. The recreation and entertainment industry increased its job count by 9.2 percent in the last year; the food services industry by 2.3 percent. Both industries have gained jobs over the past two years -- the food services industry has gained jobs for the past five years.

Meanwhile, hotel jobs have lagged. Employment fell 1.5 percent in the past year ended April -- that's on top of yearly job losses in 2005, 2004 and 2003.

Industry Jobs gained or lost, one year Percent change, one year

Leisure and Hospitality 2,600 3.2%

Recreation, arts and entertainment 1,300 9.2%

Accommodations (100) -1.5%

Food services 1,400 2.3%

Sources: California Employment Development Department, Times staff research

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Copyright (c) 2006, Contra Costa Times, Walnut Creek, Calif.

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