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Downtown Los Angeles Hotels Upgrading to Remain Competitive
with JW Marriott-Ritz-Carlton

By Hugo Martin, Los Angeles TimesMcClatchy-Tribune Regional News

Jan. 01, 2011--When a 54-story, glass-sheathed hotel complex next to the L.A. Live entertainment center opened last year, it altered the skyline of downtown Los Angeles.

It also changed the landscape for the city's hotel industry. Owners of existing downtown hotels are launching multimillion-dollar upgrades to keep pace with the upscale JW Marriott and Ritz-Carlton hotels that operate out of the glass tower.

Across the street from L.A. Live and Staples Center, the humble three-star Holiday Inn has nearly completed a $10-million makeover, becoming a four-star property with a fancy new name: Luxe City Center.

"We want to be something more unique and boutique," said hotel general manager John Kelly.

At least seven other downtown hotels -- including the iconic Westin Bonaventure and the Omni Hotel -- have either begun or are gearing up for major renovations next year. Though some of the projects were planned years in advance, industry experts said the opening of the 1,001-room JW Marriott-Ritz-Carlton tower made the upgrades a priority.

"If they didn't have an incentive before, now they have an incentive," said Bruce Baltin, senior vice president for Colliers PKF Consulting USA, a real estate firm specializing in the hospitality industry. "If a hotel doesn't compete, they are left behind."

Some hotel renovations have already won positive reviews from guests.

Randy Shaw, a senior vice president at Wells Fargo & Co., has stayed at what was the Holiday Inn and is now the Luxe City Center for nearly seven years for business trips to the bank's offices on Bunker Hill.

The Palm Desert resident has reason to be happy: He negotiated a long-term deal so he doesn't pay the 20% corporate rate increase that followed the renovation work. For Shaw, that means paying the old rate of about $292 per room instead of $350 today, but he's staying at a much more luxurious hotel.

"If they hadn't changed it I would not have cared. But now when you walk in, you just feel like you are in a really, really nice place," he said.

Hotel upgrades are a good investment, Baltin said, as newly renovated and more luxurious hotel rooms can support higher rates. And with Southern California's home construction industry in a slump, hotel owners say they can negotiate better rates from contractors to complete the renovation work.

Industry statistics suggest downtown hotels are already performing better than hotels in other parts of the county.

The revenue per available room -- an industry benchmark that's measured by multiplying average room rate by average occupancy -- jumped to $83, up nearly 16% for downtown hotels in September, compared with the same month last year. That's second only to a 22% increase for Beverly Hills hotels, according to the latest monthly statistics from PKF Consulting. Hotel occupancy rates in downtown Los Angeles also improved to 65% in September, from 62% in September 2009.

Hotel owners typically renovate or upgrade every seven to 10 years to eliminate wear and tear and keep up with the latest standards for such amenities as television sets, telephones and bathroom fixtures.

But Baltin and other industry experts say it is no coincidence that so many downtown hotels, spurred by new competitors, are sprucing up their rooms and lobbies now.

Less than a mile away from the new hotel complex, the Westin Bonaventure, the city's largest hotel, with 1,345 rooms, has nearly completed a $30-million renovation.

Crews at the hotel have installed new carpeting, light fixtures, artwork, curtains, drapes, safes, refrigerators and other features in most of the rooms. Workers are redesigning the lobby fountains, which have appeared in such movies as "True Lies" and "In the Line of Fire."

The Bonaventure renovation project has been in the works for years, said Michael Czarcinski, the hotel's managing director. But the overhaul, he said, will help his hotel compete with the pricey hotel complex that opened a few blocks away.

"It's good to keep up with the new entrants into the marketplace," he said.

The investment is already paying off, Czarcinski said, with room reservations for 2011 on pace to surpass 2010 reservations by nearly 10%. He attributes some of the increase in reservations to the growing popularity of Los Angeles to convention organizers thanks to the opening of L.A. Live.

The addition of the new hotel tower complex and L.A. Live has also drawn new investors to the city's hotel market.

Maryland-based Chesapeake Lodging Trust paid $46 million in June to buy the Hilton Checkers hotel near Pershing Square, with plans to take advantage of the improved downtown hotel market. The hotel's previous owners had completed a renovation project on the 188-room hotel in 2008, about the time that L.A. Live was opening.

"The market upside, combined with the hotel's location and positioning, drove our decision," said Douglas Vicari, chief financial officer of the trust.

A few blocks away, the four-diamond Omni Hotel on Bunker Hill is in the midst of a $14-million renovation of the 453 guest rooms and suites as well as the 20,000 square feet of meeting space. The work is expected to be completed by late February.

"With all the great new restaurants, museums and attractions such as L.A. Live, we are now in the perfect location for the higher-caliber citywide events, such as medical and high-tech conventions," said Chaya Donne, marketing director for the Omni Hotel.

The most expensive upgrade will take place less than a mile from L.A. Live, where the aging Wilshire Grand hotel and adjoining offices are slated to be demolished to make way for a $1-billion, 40-story luxury hotel and office space, as part of a project headed by Korean Air Lines.

The plans to replace the Wilshire Grand were developed independent of any other downtown projects, but the mixed-use development is certain to benefit from the downtown revival, said Ayahlushim Getachew, senior vice president of Thomas Properties Group, Korean Air's development partner.

"It's an opportunity to capitalize on what is happening in downtown," she said. "Downtown is going through a renaissance."

The Wilshire Grand will close at the end of 2011, and the new hotel is scheduled to open in 2015.


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