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The Southern California (Orange County) Tourism Boom of the Past
Couple of Years Might Wane this Summer
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An Uncertain Summer
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By Sandi Cain
Orange County Business Journal Staff

May 2008 - The tourism boom of the past couple of years might wane this summer as consumers scale back spending in the face of rising living costs, shrinking jobs and an uncertain economy. 

Fifty-seven percent of Americans have taken at least one trip away from home in the past year—down from 63% in a 2007 survey, according to the National Travel Monitor by Orlando, Fla.-based Y Partnership. 

While 76% of travelers still are determined to get out of town, many say they’ll travel less often or for fewer days, primarily due to financial and job concerns. Fifty-three percent of all trips already taken this year have been long weekends of three or four days.

“That doesn’t (bode) well for the next 12 to 18 months,” said Peter Yesawich, chief executive of Y Partnership who presented the leisure trend data at the eighth annual Resort Conference in San Diego last month.

While that’s unsettling news for the local tourism industry, Orange County hoteliers are crossing their fingers that a downturn won’t come to pass. 

“We had a tremendous (room) pickup in March,” said J.D. Shafer, general manager of the Hilton Waterfront Beach Resort in Huntington Beach. “If that’s any indication, we’re not concerned for summer.”

But soaring fuel costs, increasingly difficult air travel and worry about what lies ahead might mean fewer Disney princess dresses and steak dinners for this year’s vacationers. 

“The good news is that most Americans will stay closer to home,” said Bill O’Connell, who owns the Best Western Stovall’s Inn and three other tourist hotels in Anaheim. “With 30 million people within a day’s drive, we’ll probably be OK but not great (this summer),” he said.

The drive-in market has always been a solid one for OC with Disneyland as the anchor that brings many vacationers here. 

This year, Disney will unveil its Toy Story Mania ride and the Disney World of Color nighttime light show at Disney’s California Adventure. In March, the company debuted a Playhouse Disney program and the Pixar Play Parade at California Adventure to entice families to visit. 

At Disneyland, Innoventions this summer will get a new Dream Home that will feature digital technology for the home that is on the horizon. This fall, new Tinkerbelle characters also will be introduced at the park.

Disney officials say gas prices don’t traditionally impact visitor numbers and that high gas costs may cause people to come to Disneyland instead of going somewhere else. With gas prices spilling over the $4 per gallon mark, that theory may be put to a test. 

“Gas is approaching the point at which people say they’d change their plans,” Yesawich said. Nationally, that figure was $3.50 a gallon—a price California hasn’t seen in more than a month. Yesawich said higher gas prices likely will translate to less money spent on hotel stays or dining. “Cancellation is way down on the priority list of options,” he said.

One plus for amusement parks and OC: Travel with children is on the rise, with 38% of travelers saying they’ve taken at least one trip with kids.

So far, hoteliers haven’t seen a slump in occupancy. But they say the booking pace has slowed. 

“The market is soft because people are being cautious about money,” said Dan Fitzgerald, director of sales at the Hilton Costa Mesa. “We’re looking at it as a short-term blip.”

Last year, overall occupancy in the county leveled off at around 72%, while overall rates in-creased roughly 7%. 

“2005, 2006 and 2007 were terrific years and this year was terrific in the first quarter,” O’Connell said. 

Hotels are having a difficult time figuring out what to expect.

“There’s a much shorter booking window,” said Doug French, director of revenue management at the Hilton Anaheim, the county’s largest hotel. Vacationers, he said, typically book rooms 30 to 40 days ahead of travel. “Now that’s three to seven days,” he said. “They’re making last-minute decisions even to come to Disneyland.”

Weather also drives some of those impromptu decisions. During the brief April heat wave, coastal hotels got an unexpected bump in business as temperatures rose.

“We were at 70% occupancy (for the weekend) on Friday and ended up selling out,” said Todd Wheeler, director of sales at the Doubletree Guest Suites in Dana Point.

To entice the indecisive, more hotels are offering special packages such as Hilton Waterfront’s S’Mores & More beach party.

“We’re promoting summer packages heavily,” Shafer said.

The Costa Mesa Conference & Visitors Bureau has for several summers offered gas and/or restaurant coupons under a Drive & Dine program for guests who stay at member hotels.

“We do very strong business with drive and dine,” Fitzgerald said.

Still Hopeful

Other factors that keep Orange County tourism officials hopeful:

  • The buzz around GardenWalk in Anaheim is sure to increase after the May 15 grand opening of the 440,000-square-foot entertainment and lifestyle shopping center across the street from Disneyland. Restaurants at the complex—including Cheesecake Factory, California Pizza Kitchen, P.F. Chang’s, McCormick & Schmick’s Grille and Roy’s of Hawaii—began opening in December. This month, the first of the entertainment and retail spots will open, including AMF 300 bowling lounge, Heat Ultra Lounge, Bar Louie and a 14-screen movie complex. 
  • The sinking dollar is good for overseas travelers whose money is worth considerably more here than a year ago. “We hear from our national office to expect higher numbers of European travelers,” said Brad Logsdon, director of sales at the Hilton Anaheim. 
  • Special events and celebrations typically give a little boost to visitor numbers and OC has a number of those in the works. 
    • The Surf & Sand in Laguna Beach celebrates its 60th anniversary this year and started the year with a round of spring specials on room rates, spa treatments and wine-pairing events. 
    • Newport Dunes celebrates 50 years with 50s-themed specials and the debut of a remodeled Back Bay Bistro, formerly the Back Bay Cafe, at the upscale RV park. 
    • And the Festival of Arts and Pageant of Masters celebrates the 75th anniversary of the pageant and its tableaux vivant presentation of master artworks. This year’s theme is “All the World’s A Stage.”
Weathering a Recession

The top 25 markets in the U.S. are less likely to be affected by a recession than smaller markets, according to Smith Travel Research. 

OC is among those larger markets. As of February, the most recent month for which figures were available, occupancy for 2008 was 71%, according to figures from Los Angeles-based PKF Consulting.

The county’s coastal resorts still report strong bookings for summer but with a lot of last-minute reservations, an indication that the luxury traveler has yet to feel much of a pinch in the pocketbook. These are the travelers who also are likely to stop by South Coast Plaza, which gets about 30% of its business from visitors outside the region. 

“The top tier isn’t impacted by a downturn,” said Werner Escher, executive director of domestic and international markets for South Coast Plaza.

Nagging Concerns

Though OC might end up holding its own through 2008, there are some issues beyond its control that could end up hurting visitor numbers:
 

  • Despite an upbeat press release from the Department of Commerce about international visitor numbers in 2007, the reality is that overseas visitors aren’t flocking to our shores. 

  • According to the Commerce Department, foreign visitors last year numbered 56.7 million, up from 51.2 million in 2000. But leave out visitors from Canada and Mexico and it’s a different story. The number of travelers from overseas was just 23.9 million—2 million fewer than in 2000, despite the drop in the value of the dollar. 

    The Travel Industry Association says that if overseas visitors had kept pace with global travel trends since 2000, we would have welcomed 33.3 million overseas travelers last year. Overseas visitors are more coveted because they spend an average of $4,000 per visit. 

    Earlier this year, stories in several European publications urged their citizens to avoid the U.S. due to its unfriendly visa and entry procedures. The Travel Industry Association and other business organizations have been calling for reforms that might bring more of those visitors back.
     

  • Roughly three-quarters of California travel is within the state, with Southern California residents heading north and vice versa. How that will play out with soaring gas prices remains to be seen. In mid-April, some stations in San Francisco were charging $4.29 for regular gas. 

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  • High airfares, luggage surcharges, flight cancellations for equipment repairs and weather delays have done little to make our skies a friendly place for vacationers. An increasingly time-starved population doesn’t want to waste precious vacation days at the airport. 

  • The maximum travel time consumers are willing to spend to get to their destination now hovers at around six hours, down from eight hours just a few years ago, Yesawich said. 

    John Wayne Airport, which nearly reached its negotiated capacity last year, has seen its number of passengers drop 5.3% through March, compared to a year ago, to 2.2 million—and those figures don’t yet reflect the loss of Aloha Airlines, which went bankrupt last month.
     

  • Cruise ships are taking a bigger chunk of the consumer market, with bookings up 51% in the past five years. While no cruise lines sail from OC, numerous three- to seven-day cruises depart Long Beach and Los Angeles for Mexico—a popular, short getaway route. And the Disney Cruises are returning to Los Angeles for the summer this year.

  • Sign of the Times

    Customized packages targeted to the regional market, online hotel deals and special events are likely to crop up throughout the county to lure visitors. 

    Knott’s Berry Farm, which will debut the Pony Express coaster for summer, also staged a Mexican Fiesta in April with arts, crafts, food and entertainment as an extra enticement to the area’s big Hispanic population. Hotels that work with Walt Disney Co. were touting vacation packages online in early April. And the Ritz-Carlton created a program called Ride a Wave with Surfers Healing that gives back to children with autism through day camp activities on Wednesdays in July and August. 

    Locals staying closer to home may take advantage of special online packages, which can be changed quickly depending on demand, Hilton’s Logsdon said. 

    “Everyone’s in the same boat trying to figure out how many oars we need in the water,” Logsdon said. “We expect it to last through the summer.”
     

    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

    sdcain31@cox.net
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    Also See: Ten California Coastal Resorts Put Aside Competition, Band Together to Make Marketing Pitch / Sandi Cain / May 2005
    Orange County Hoteliers Hope for a Solid Summer Season to Regain Momentum / Sandi Cain / May 2002
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