L.A.: Economic Recovery Benefits Travel Buyers

<H1> L.A.: Economic Recovery Benefits Travel Buyers</H1>By Glenn Carter

<I>Los Angeles </I>- If you were to say, 'Now is the time to build a hotel in Los Angeles,' you might be greeted with snickers. But today, it's not an out-and-out joke to declare that the best place to build a hotel is a city that was rocked by earthquakes, riots, a depression in the crucial aerospace industry and a general collapse in image.

Indeed, the fact that the Los Angeles Convention and Visitors Bureau has opened sales offices in Chicago, Washington and New York is hard evidence of the city's seriousness about building corporate business, said Randy Villareal, general manager of the Regal Biltmore Hotel, as well as president of the Downtown Marketing Council and chairman of the CVB's sales committee.

Ironically, L.A.'s continuing weakness makes it attractive for both travel managers and meeting planners. Because hotels have only begun to climb out of the depths as far as price and occupancy are concerned, room availability plus low cost provide an attractive alternative to tough seller's markets like New York and Boston.

Jeff Kurn, a travel manager at Hewlett-Packard in Palo Alto, Calif., places most of his travelers near Los Angeles International Airport, where the company has offices. While acknowledging that prices are beginning to firm up in the area, he said, "it's still a good value, and Los Angeles is not a tight city, as other cities have become."

Another travel planner acknowledged that prices might be creeping up for the general public, but added, "we are not experiencing the problem of price with the hotels that have done business with us. I can't guarantee volume, but for those with whom we have done business in the past, that is not a problem. They will hold back rooms on a Wednesday night because they know we can probably use them."

Price competition in the Los Angeles area "has not been inflated as much as in other parts of the country," according to Gerard Smith, senior partner at T&E Group, a Newport Beach, Calif.-based consulting firm that sets up preferred hotel programs.

However, the lodging situation here may soon reflect that of other major destinations across the country. L.A. properties are starting to toughen up their negotiating stance with buyers.

Melissa Mills, a research associate at PKF Consulting, said occupancies have reached the level where "most managers feel they can compete at least in a conservative way on rate."

Dana Meyer, regional sales manager for Country Side Inn & Suites, a local group of eight hotels, said negotiations eventually would change. "We might not raise prices right away, but we will be charging for things like audiovisual and meeting rooms, and we will hold clients to volume contracts," she said.

If the general economic situation does improve, downtown hotels stand to benefit for one reason: There simply aren't that many of them. "San Francisco might have 100 hotels downtown; we have about eight," said Martin Driskell, vice president of marketing for the Inter-Continental.

"There's not a lot of inflation yet downtown or anywhere in the area, although occupancy seems to be rebounding," said Steve Cornwell, president of Express Reservations, a Boulder, Colo., hotel discounter that books rooms in Los Angeles and New York for corporate travelers. "If that continues, the hotels will try to catch up in price over the next year or two."

Thinking of Los Angeles as a single entity is difficult because, as any frequent visitor will tell you, the city is not really a city, but a series of neighborhoods and areas. Each has had a different experience over the past few years, with downtown taking the hardest hit and outlying areas like Santa Monica holding up well.

Some observers think business travelers will continue to stay outside downtown even if their business is there. "Visitors to Los Angeles usually rent a car, and some don't mind going back and forth to West Hollywood, Beverly Hills or to the beach from downtown," Cornwell said.

Smith disagreed. "If you're going to work downtown, you have to be downtown. Because of traffic, you really want to be close."

Hotel business at Los Angeles International Airport has experienced a recent upswing, according to Michael Erickson, director of marketing for the Doubletree Hotel. One reason, he said, is that rates are about $20 less than at properties downtown.

"The great thing about the airport hotels," said Erickson, "is that all 10 major properties have gone through major renovations in the last two years [including $4 million worth at the Doubletree]. Everyone at the airport is running healthier occupancies; we sold out 40 nights last year and should do that again this year."

PKF's Mills said the airport is "a bargain these days; it's the cheapest place in town. There was a lot of aerospace business in that area, and it was in the pits for several years. Travel managers should still have clout at the airport with the average daily rate up not quite 6 percent off a low base."

Room availability could be another story, however. "Domestic business travelers will be competing with individual travelers, tourists and international business, and they might have to book ahead," Mills said. "With no building in sight, we may have some very busy days ahead.