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Palm Springs Hotel Openings, Renovations May Be
Finished Just In Time for a Tough Economy

By Kimberly Pierceall, The Press-Enterprise, Riverside, Calif.McClatchy-Tribune Regional News

Jan. 25, 2008 - As far as makeovers go, the Riviera Resort & Spa is in its "before" stage.

Whatever couldn't be pried off the walls and sold in a liquidation sale several months ago is what remains. Fixtures have been torn out, the pool has been drained and weeds have staked a claim on the landscaping.

The post-apocalyptic conditions don't bother Jim Lopez, the hotel's director of sales and marketing, however. Lopez knows what the $70 million "after" will look like.

"People will be so surprised when they see it," Lopez said while he toured the 24-acre property. "This is an icon for Palm Springs," he said.

He also knows the hotel is scheduled to open during an economically foreboding year.

Hotels across the country will open 115,000 more rooms in 2008 than opened in 2007, the largest annual growth since 2000, according to a forecast by Atlanta-based PKF Hospitality Research, an affiliate of PKF Consulting, which represents buyers and sellers in hotel transactions.

The Riviera is one of three hotels in Palm Springs with extensive renovations in its future. It will bring back 407 hotel rooms that have been closed since the hotel was bought in 2006.

Two more proposed hotels to be built from the ground up near the city's convention center, the 490-room Hard Rock Hotel and the 250-room Mondrian, could open in 2010. All were the focus at a Palm Springs Economic Development Corp. breakfast Thursday.

Tim Ellis, general manager of the Palm Mountain Resort near downtown Palm Springs, said his resort's 120 rooms would become 188 after an expansion is finished in early 2009 and likely be priced between $120 and $150.

"That's what Palm Springs needs," Ellis said. "This is not a $300-a-night hotel."

A plan to overhaul the Spa Resort Casino's hotel, owned by the Agua Caliente Band of Cahuilla Indians, may be affected by the outcome of the tribe's gaming compact with the state that is on the ballot in the Feb. 5 election. Once finished, the spa hotel would likely have 408 rooms, an increase of 178.

"The hotel is beyond its prime," said tribal planning director Tom Davis. "It's a money pit, frankly."

The Hard Rock Hotel's developer, Santa Ana-based Nexus Cos., will be seeking financing in a couple months to build its 490-room hotel that it hopes to start constructing before year's end and to finish within 24 months, said Rob Eres, development manager.

So far, the group has secured Jerry's Famous Deli as its restaurant and has signed a letter of intent with Pure Management Group to manage a Pure nightclub.

Tourism rarely bucks current economic trends. When the economy sours and consumers start grasping to save money, they cut travel from their budgets. Hotel owners should expect revenue growth this year, but it will likely be slower than the 4.5 percent revenue per available room originally forecasted by PKF, the slowest pace since the industry's recession from 2001 to 2003, according to the firm.

"The decline might be a little more than we first thought," said Robert Mandelbaum, director of research information services. "But we don't expect the industry to fall off the face of the Earth."

If the economic downturn turns out to be an inflation-induced recession, hotel owners can at least adapt quickly and raise nightly rates, literally overnight, but they won't notice a windfall since they'll need to pay more for services and supplies, Mandelbaum said.

Corporate travel is typically the first to be axed from budgets in a full-blown recession.

"What we've seen in past recessions, it's the leisure traveler that still takes a vacation." They just alter their plans so trips are cheaper and closer to home, he said.


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Copyright (c) 2008, The Press-Enterprise, Riverside, Calif.

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