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Hotel Brokers: From Sales to Consultants 
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By Sandi Cain 
Staff Reporter Orange County Business Journal
January 2002

Local hotel brokers could be busy in 2002—but not on sales as much as helping clients on survival strategies. 

“Some borrowers are going to seek our firm to assist them in working with their lenders if they cannot meet debt service in the first or second quarter,” said Don Wise of Corona del Mar-based Wise Hotel Investments. 

Wise and other hotel brokers say they are preparing for a year in which sales take a back seat to financial consulting and other services. Fallout from Sept. 11 stands to cool Orange County hotel sales, which peaked in 2000 and dropped last year. Statewide, hotel sales could come in down by 20% for 2001, according to industry sources. 

Wise, who spent 20 years dealing hotels with CB Richard Ellis Services Inc. before launching his own company, said he expects to see double the usual number of loan defaults in the coming year. Lenders are likely to seek out
assistance in selling mortgages or assets as some hotel properties revert to their lenders, he said. 

Even so, broker Alan Reay of Atlas Hospitality Group in Costa Mesa, said there will be some sales this year: “There are some so-called vulture funds starting to look for distressed properties.” 

Irvine-based Chandler Hotel Group, which launched a year ago, saw two deals fall through since September, according to company principal Jared Chandler. 
“One was a $74 million deal,” he said. “That hurt.” 

At least one OC hotel owner—Newport Beach-based Hanford Hotels—said it isn’t looking to sell any of its portfolio this year. 

Instead, Hanford President Mike McGlone said his company would like to make some new hotel investments.

Trouble is, “the banks aren’t lending,” he said. 

San Clemente-based Sunstone Hotel Investors purchased 10 hotels in 2000, made no buys in 2001. But Chief Executive Bob Alter said Sunstone is “actively seeking potential acquisitions and has significant capital to acquire
additional properties.” 

Sunstone owns 52 hotels, including Hawthorne Suites in Anaheim and 10 others in Southern California. 

As far as new hotel development in OC, activity has virtually ceased. The exceptions are the Hyatt Grand Coast in Huntington Beach, The Colony Hotel at Laguna Beach and Marriott Suites in Garden Grove, which were well under
way by September. 

Costa Mesa based Ayres Group, whose portfolio includes 16 midsize hotels in Southern California under the names Country Inn by Ayres and Ayres Hotels, opened hotels in Laguna Woods and Anaheim last year. 

“We’re still struggling with Anaheim a little,” said Don Ayres III, vice president of hotel group operations for the family-owned business. “But our (overall) revenue for 2001 held steady.” 

Ayres said the company has no development plans in OC for 2002 beyond the 115-room hotel already slated for a June opening in Seal Beach, though they are considering a hotel on a site in Hawthorne. 

Meanwhile, Irvine-based Pacific Hospitality Group, which owns the Doubletree Irvine and Crowne Plaza in Garden Grove, is set to open its third hotel later this month. The 252-room Doubletree Santa Ana at Hutton Centre is the first
full-service hotel to be built in Santa Ana in 10 years. 

But that hotel—-like the St. Regis in Dana Point, Holiday Inn and Staybridge Suites in Anaheim and Embassy Suites in Garden Grove—faces hurdles. 
“New hotels are in a lot of trouble,” Hanford’s McGlone said, because they haven’t had a chance to build up reserves to offset the effects of a downturn.” 

The difficult hotel market could provide an opening for management firms, according to Larry Broughton, founder of Broughton Hospitality Group of Huntington Beach. Broughton specializes in boutique hotels of 60 to 200 rooms and focuses on boosting a hotel’s operations, marketing and concept development rather than building new hotels. 

“I look for underperforming properties and take them over to build equity for the owner,” he said. 

Independent operators turn to management firms when a market goes sour in order to benefit from broader marketing budgets and economies of scale in purchasing, Broughton said. 

“My phone is ringing,” he said. “Lots of hotels are struggling.”  Broughton reopened the former Gala Villa Inn in Palm Desert as a luxury boutique hotel called Mojave in October.

Despite the timing, he said the hotel is doing well. 

“It’s surprising in light of 9-11,” he said.
 

Sandi Cain is copy editor and a staff reporter covering hospitality,tourism, travel and sports. 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 
Staff Reporter 
Orange County Business Journal
cain@ocbj.com
http://www.ocbj.com

Also See 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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