L.A. Hotel Development Lags Behind Biz Room Demand
<B> L.A. Hotel Development Lags Behind Biz Room Demand</B>
By Fred Gebhart
Los Angeles is scrambling to meet skyrocketing demand from business travelers. While Los Angeles International Airport is biting the bullet and adding new facilities, travelers should not expect similar relief on the hotel side any time soon. Hotel occupancy and rates are posting double-digit annual increases, but the room supply will continue to lag behind demand for several few years.
The good news from LAX is that American Airlines is putting $40 million into Terminal 4, adding 20 ticketing positions, new customs and immigration facilities, new gates, an expanded Admiral's Club and new premium frequent flyer lounge facilities.
United Airlines is upgrading Terminals 6, 7 and 8 to the tune of $200 million, and the United Shuttle facilities, long a sore point with business travelers, are expanding by 40 percent. Originally designed for 32 departures in the 1970s, the Shuttle area, which has cramped staff as well as passengers, has been handling up to 90 flights daily, said project manager Jim Dennison. More gate space and concessions, wider hallways and new baggage facilities should help speed passenger flow.
A new security system already is cutting transit times. By repositioning screening stations, United was able to eliminate one security checkpoint entirely and add 40 percent more X-ray and magnetometer lanes. Still in the works is a Red Carpet Club makeover in Terminal 7. The current Club will be closed from February to mid May, Dennison said, replaced by a temporary Club directly across the concourse.
The not-so-good news on the hotel side: Expect upgraded facilities, but expect to pay more for them. "The core pool of product for meetings and conventions has not increased significantly since 1988," said Michael Collins, executive vice president for the Los Angeles Convention & Visitors Bureau. "The core product is suddenly starting to wake up. Rarely do you see occupancy jump 15 percent at the same time rates are up by 10 percent."
Demand may be outpacing L.A.'s 93,400 rooms, but most property owners are moving upmarket rather than bringing new products online. Bruce Baltin, senior vice president for PKF Consulting in L.A., noted that the 244-room Hyatt that opened in Valencia in late 1998 is the largest project on the books for greater Los Angeles.
Despite a handful of high profile openings like Le Merigot in Santa Monica, most hoteliers are concentrating on renovations. "We are seeing new openings," Baltin said, "but not a huge number of them. Occupancy is pretty close to maxed out in many areas of the city already. We expect growth to slow slightly in 1999, but rates are likely to be up by another 9 to 10 percent."
The only major property on the horizon is a 1,200-room headquarters hotel for the convention center. The hotel is part of a downtown master plan that will be submitted for local government approval this summer, Collins said, but construction is several years away.
The Biltmore, Radisson, Westin and other downtown properties, however, all are investing millions in property upgrades. "Business travelers have become very sophisticated," said Albert Salah, general manager of the Radisson Mid-Town. "The market is dictating what we must do to keep up and compete. The competition is becoming fierce."
The Radisson Mid-Town completed a $5 million renovation in late 1998, including makeovers of its 240 guestrooms and a new $700,000 audiovisual system for the ballroom. That's in addition to Radisson's contribution to the private security force that has transformed downtown Los Angeles. Insurers that once avoided high-crime downtown have worked themselves into a bidding war over low-claim, high-profit policies on city-center hotels.
Plummeting crime rates have helped boost demand for downtown hotel space and encouraged renovations. The Westin Bonaventure last year spent $25 million to refurbish all 1,354 guestrooms and add another 10,000 square feet of meeting space, among other changes. The Bonaventure has L.A.'s largest ballroom, at 26,000 square feet, plus 45,000 square feet of outdoor reception space.
The Regal Biltmore also is in the midst of a full-property renovation, which is slated for completion by the summer.
What about new construction in the area? The 175-room Le Merigot Beach Hotel is scheduled to open in Santa Monica this month. Business travel to Santa Monica is up 13 percent in the past five years, said city officials, but the beachfront city has little more than 1,000 guestrooms.
Le Merigot is aiming at the top 20 percent of the market, said director of sales and marketing Renee Spingola, with emphasis on advertising, entertainment and banking. The property has just 10,000 square feet of meeting space, split between several smaller rooms for intimate, multi-day gatherings. The ideal customer, Spingola said, is a sales or training group of 20 to 25 attendees, with intense sessions relieved by high-end food and beverage breaks.