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San Jose's 14 Major, Full-service Hotels Report 59% Occupancy, 
Down from 66% in October 2007
By John Woolfolk, San Jose Mercury News, Calif.McClatchy-Tribune Regional News

Nov. 12--The sagging economy is keeping the vacancy sign flashing at major San Jose hotels, worrying city and tourism officials about the possibility of a prolonged downturn in occupancy rates.

Figures from the San Jose Convention and Visitors Bureau show the occupancy rate last month in the city's 14 major, full-service hotels was just under 59 percent, down from more than 66 percent in October 2007.

"This is certainly a concerning month for us, and something we're monitoring very closely to make sure we're competitive," said Daniel Fenton, the bureau's president and chief executive officer. But, he added, "It's way too early talk about what this means from a trend standpoint."

The decrease largely reflects pullback from corporate meeting and event travel in light of the economic collapse that began in September. Fenton noted that average occupancy for the fiscal year remains in the same 63-percent range as last year.

Citywide average daily room rates fell $10.15, and total room revenue fell citywide nearly $2.3 million. The city manager's office had no immediate reaction to how the latest figures would affect city tax revenues.

The downturn comes as city officials consider a major $300 million expansion and renovation of the McEnery Convention Center aimed at making it more competitive.

Much of the money for the expansion would come from the formation of a new hotel taxing district, which

would generate $125 million. The proposed tax on hotel rooms would amount to an additional 4 percent on top of the current 10 percent bed tax. The rest of the expansion would be paid for by the city's redevelopment agency through the issuing of bonds.

But Fenton said hotels remain supportive of the expansion project despite the downturn.

"We've been out on a daily basis working with the hotels," Fenton said, "and we really see strong support on the industry side for moving this project forward."

Bill Ekern, project manager for the San Jose Redevelopment Agency, said the project remains on track, with the City Council expected to consider further steps next month.

"We certainly understand there's a near-term bump" in the road, Ekern said. "But looking at the project overall, we think we'll be OK."

Contact John Woolfolk at jwoolfolk@mercurynews.com or (408) 975-9346.

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Copyright (c) 2008, San Jose Mercury News, Calif.

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