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But Dries Up; Handful of Small Hotels Opens, Little Construction Under Way |
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.
Days Inn & Suites in Anaheim 2029 S. Harbor Blvd. Anaheim, California 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 Laguna Beach CA 949-497-2680 [email protected] |