by Kathryn Maese
With a potentially devastating hotel strike averted last month, and a pledge by city officials to redouble tourism efforts, the local hotel industry is staging a steady comeback. More surprising is the fact that Downtown is leading Los Angeles County with a double-digit surge in hotel occupancy over last year, and hospitality officials predict the strongest summer season since 2000.
Compared to countywide markets, the Central City has seen the most dramatic year-over-year growth, with the occupancy level soaring since May 2004 from 56.5% to 67.4%, according to the latest data from Smith Travel Research.
There are numerous factors playing into the bounce, and some Downtown Los Angeles establishments are benefiting from events outside of the area. A prime example is the current King Tut exhibit at the Los Angeles County Museum of Art. Industry experts also report an increase in the group and leisure travel markets.
“This will be our best July ever,” said Janelle Cram, marketing director for the 453-room Omni Los Angeles Hotel, just three blocks from the Walt Disney Concert Hall. “We will run at 85% occupancy, when last year we ran at 69% occupancy.”
It’s a drastic turnaround from the last few years, when 9/11 triggered a nationwide travel slowdown that sent the industry into a slump, leaving hotels struggling to fill rooms. Most recently, surging gas prices put a glitch in regional travel, while a protracted hotel contract battle led to a number of cancellations. Among the Downtown hotels affected by the dispute with the union were the Hyatt Regency, the Westin Bonaventure Hotel & Suites, the Millennium Biltmore and the Wilshire Grand.
However, Mayor Antonio Villaraigosa recently helped union leaders and hotel brass find common ground over a contract for employees. Now, with the cloud of a potentially devastating strike lifted, some groups that threatened to take their events elsewhere have been wooed back.
At the Bonaventure, Sales and Marketing Director Bob Nee said the hotel was able to salvage one of its biggest chunks of business by securing the National Education Association convention. The four-day event had lined up venues at several airport hotels in case the conflict was not resolved in time for the annual function. Instead, all went as planned, and the group wrapped its Downtown gathering last Wednesday.
“We are in the final throes of assessing the total impact, and we know we have had several groups that have cancelled out of respect for the labor dispute,” Nee said. “But that’s come and gone and we are very pleased that it ended when it did because we were able to welcome the NEA back to Downtown L.A.”
Nee said the Bonaventure will see another boost in early August when the five-day Siggraph conference, a gathering of computer graphic and interactive technology professionals, brings more than 25,000 attendees to town.
The Bonaventure and others are also enjoying a resurgence in the leisure market, which had been relatively flat last year. While Nee said the hotel won’t see the double-digit gains in occupancy that other Downtown venues have experienced, in part because of the contract fallout, he said he still expects “a few percentage points higher than last year, and during the summer we’ll have good growth with our group segment.”
Market Shift
The numbers are rising. In 2004, the city saw a record 24.3 million visitors flock to the area, a 4.1% increase over the previous year’s 23.3 million tourists. This year, the bureau predicts a 2.5% increase to 25 million visitors.
L.A. Inc., the city’s convention and visitors bureau, attributes the uptick in local visitors to an improving economy and pent-up demand for Los Angeles travel following a number of weak years. That has translated to a 5.6% increase in room rates over last year to an average of $100.10, according to Smith Travel Research.
“Remember that the industry is cyclical and we are enjoying that part of the cycle that goes up,” said Michael Collins, executive vice president of L.A. Inc. “But what we may be looking at is a structural solution to those ups and downs.”
Collins said a larger market shift is at work, led by a multi-billion dollar Downtown resurgence in the form of lofts, restaurants, nightclubs, parks, entertainment districts and most importantly, a 1,200-room Convention Center hotel that will allow the city to accommodate more convention goers. Los Angeles has lost numerous conventions to cities such as San Diego and Anaheim in part because they have so many more hotel rooms within walking distance of their convention centers.
“There’s so much going on here that Downtown is creating its own gravity,” Collins said. “I think what we’re seeing in Downtown is an enormous new capacity to generate demand.”
The rapidly growing residential base throughout Downtown is also a key component. More than 27,000 people will be living Downtown by year’s end, while another 4,487 units are being built and permits have been secured for nearly 1,400 more, according to the Downtown Center Business Improvement District (DCBID). Collins said the presence of this affluent population (a DCBID study earlier this year reported a $90,000 median household income in the new residential structures) will bolster the “visiting friends and relatives” market as their visitors stay at local hotels and spend money at shops and restaurants.
“One half of visitors come from that market, and up until now most of those people have been going to the Valley. But the equation is changing,” Collins said.
Hotels are beginning to respond to that residential demand. The Omni’s Cram said the hotel created its Noe restaurant to help attract visitors, and is currently adding a spa.
“The city has had a very strong comeback and people are looking at Downtown, its transportation, the concert hall and the cathedral,” she said. “We created our restaurant not only counting on Disney Hall but the revitalization of Downtown condos and LA Live (next to Staples Center). We’re hoping to capture that market.”
Despite predictions of a rebound, hoteliers caution that the industry still has a long way to go, and is only now returning to normal levels. Some have experienced relatively flat occupancy numbers over last year, while others report that the lack of regular conventions has required more creative methods of generating business in-house, such as promotions or smaller events.
At the Los Angeles Marriott Downtown, General Manager Bill Worchester said the hotel’s mainstay has been booking education, government or business groups. Its biggest event this summer is the Microsoft convention.
“Most of it is a lot of small, homegrown business,” Worchester said. “We’re looking for a decent summer, but not a record-breaking summer. As the economy has improved it has helped business travel and we’re optimistic.”
Events of the Season
Hospitality industry officials expect 2005 to wind up as Downtown’s best season in half a decade. While part of the upswing is due to a rebounding economy and the increasing number of Downtown residents, the area’s strong slate of tourist activities will also likely play a role. Here are three Downtown Los Angeles attractions that will draw healthy attendance figures this summer, and one non-Downtown event that is also benefiting the area.
Jean-Michel Basquiat Retrospective: This exhibit at the Museum of Contemporary Art’s (MOCA) Grand Avenue location from July 17 to Oct. 10 is expected to generate a lot of buzz. The show spans the influential artist’s career from 1979 to 1988, and the work explores issues of ethnic identity, urban culture and music. The last art blockbuster Downtown was MOCA’s Andy Warhol retrospective three years ago, which drew about 150,000 people. While not as large as Warhol, Basquiat is nonetheless expected to grab attention and attract a new, young audience to Downtown.
Disney Hall Tours: More than 105,000 people have visited the Frank Gehry-designed home of the L.A. Philharmonic since it opened in 2003. Now, concert hall officials have launched a new program aimed at luring more visitors. On the slate are a 60-minute guided tour of the hall, a 45-minute urban garden tour of the one-acre green space, and a two-for-one deal - in partnership with L.A. Inc. - on the self-guided audio tours. “Anticipating that there would be a Bilbao effect at the concert hall, we needed to figure out some means of creating an answer for tourists that would let them experience the hall without having to see a concert,” said Catherine Babcock, a spokesperson for the Music Center.
X Games: From Aug. 4-7 Staples Center - one of two main venues - will host a number of the popular events, including skateboarding, BMX and inline skating. Downtown gets a solid boost from the X Games, with restaurants, hotels and other businesses getting a cut of the extreme action. Last year more than 100,000 X Games attendees generated about $50 million for the economy.
King Tut Exhibit: Though the exhibit featuring the Egyptian boy king takes place at the Los Angeles County Museum of Art in the Miracle Mile, a few Downtown venues are already reaping the benefits. The Omni Los Angeles Hotel and the Wilshire Grand Los Angeles are offering hotel packages during the exhibit, which ends Nov. 15. Local landmarks like Disney Hall are expected to see a boost from the influx of visitors. The last time Tut was in town - 26 years ago - nearly 8 million people took a peek.