Dec. 5--Bay Area hotels, hit hard by both the recession and Sept. 11 jitters, sit nearly half-empty these days as operators attempt to entice travelers with everything from theater tickets to charity donations. 

"Typically, September and October are our biggest travel months in San Jose for business travelers," said Daniel Fenton, president and chief executive of the San Jose Convention and Tourism Bureau. "The occupancy rates were already dipping way before then, and when Sept. 11 hit the real bottom fell out." 

The twin impacts on California's $75 billion tourism industry are nowhere more dramatic than at Bay Area hotels, where occupancy rates have fallen faster than in other cities in the state. 

A survey by Smith Travel Research shows hotel rooms in San Francisco and San Mateo County were an average of 58 percent full in October, compared with 86 percent one year ago. The San Jose Convention and Visitors Bureau reported hotel rooms an average 55 percent full in October, compared with 82 percent in October 2000. 

The most recent survey by PKF Consulting shows a 59 percent occupancy rate for San Francisco and airport hotels in September. It placed the occupancy rate at 54 percent for hotels in San Mateo County and 54 percent for the East Bay. Hotels in San Jose and the Peninsula were only 50 percent full. 

The break-even point for most hotels today is 50 percent to 55 percent occupancy, said Jeffrey Dallas, a hotel industry consultant with Ernst and Young in Los Angeles. "Hotel rooms are daily leases," he said. "Every night you have a room to rent." 

The high occupancy rates of a year ago means rates here had further to fall than in the United States as a whole. Nationwide, 60 percent of available hotel rooms were rented in October, compared with 67 percent one year ago, according to Smith Travel Research. 

The lack of hotel guests has brought layoffs everywhere. About 34 percent of the members of the hotel and restaurant employees union in San Francisco have lost their jobs. Nationwide, the union estimates more than 30 percent, or 80,000, of its 265,000 members are out of work. 

San Jose-area hotels are yet another example of an industry that prospered with the tech boom, then faltered with the tech fizzle. As many as 70 percent of those who stayed overnight in the past were business travelers. 

"Things were bad in Silicon Valley way before Sept. 11, and the attacks basically did things in," said Gary Carr of PKF Consulting, which monitors hotel industry trends. 

The San Jose hotels have joined with other businesses to promote the "Reunite with Friends, Reconnect in San Jose" spending campaign. "I wish I could say it was an easy sale," Carr said. 

At the Hilton hotel in Scotts Valley, which relies heavily on corporate bookings, the occupancy rate hovers around 40 percent to 50 percent. 

"The last good month we had was January 2001," said general manager Rich Higdon. 

He's lowered rates, renegotiated contracts with local companies, directed his sales staff to capture different clients and cut down on landscaping and fresh flowers to save money. 

One bright spot is the banquet rooms, which have been busy every weekend with holiday parties. For $99, party guests can book the "Take the Elevator Home" package. 

Many hotels have drastically reduced rates, even at upscale properties. The average rate at a San Jose hotel in October was $145.44, a drop of 21 percent from a year ago. The average room rate at a San Francisco or San Mateo County hotel was $138.19, a drop of about 16 percent, according to Smith Travel Research. 

Hoping for more drive-in traffic, some hotels with notoriously high parking fees are now making them free. Others lure guests with shopping, dining, theater and museum deals. Some are appealing to patriotic and philanthropic feelings by offering a percentage of the room rate to charity. 

"It used to be easy for innkeepers here to sit back and watch the books fill up; now they need to be much more creative," said Jim Abrams, executive vice president of the California Hotel and Lodging Association. 

Cyril Isnardd, general manager of the Fairmont Hotel in downtown San Jose, said he's encouraged by December reservations, but they're a far cry from a year ago. In addition to working with the city's campaign, Isnardd has called clients, advertised in more places and offered deals such as the "Tech package" with tickets to the Tech Museum of Innovation ($134). 

"The local clientele has been the mainstay of our occupancy so I've made calls to say, `How are you doing?' and invited them to come see the holiday decorations," he said. 

Hotels in San Francisco -- popular with tourists -- are doing better, but they've been hurt by the slowdown in air travel. More than 84 percent of San Francisco's visitors fly in, said Carr of PKF Consulting. 

"We're definitely targeting people who don't want to get on an airplane and want to go someplace close," said Sandy Baldonado, spokeswoman for Joie de Vivre Hospitality, which manages 21 boutique hotels in the area. The company is offering special packages and has bought TV commercials for the first time. 

Bargains abound in San Francisco. The Grand Hyatt San Francisco, at Union Square, for example, now offers $139 rooms that include taxes. 

The landmark Mark Hopkins offers a package that includes free parking and a shuttle to Nordstrom for $185. The Nob Hill hotel's reputation as a San Francisco institution has helped with local visitors, said spokeswoman Michelle Heston. 

Despite the bad news, hotel analysts don't expect the number of hotel defaults and foreclosures seen in the last recession. Lenders now require borrowers to put up more equity to get a loan to build or run hotels. 

A hotel turnaround doesn't look likely for at least a year, possibly longer, analysts say. The Hospitality Research Group projects that the average U.S. hotel will experience a 9 percent decline in the income received from the rental of guest rooms through 2002. 

"It's a mathematical equation," said Dallas of Ernst and Young. 

"With cutbacks in travel and people afraid to travel by plane, there are going to be lots of vacancies in hotels across the country." 

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(c) 2001, San Jose Mercury News, Calif. Distributed by Knight Ridder/Tribune Business News. JWN,