After a year of recovery, hotel operators and analysts are predicting that rising occupancies and room rates will continue into 2005, if at a somewhat slower pace. If predictions are correct, RevPAR, defined as revenue per available room and the key measurement of success for hotel operators, will eclipse peak 2000 levels by the end of 2005. Bruce Baltin, senior vice president for PKF Consulting, said that Valley hotels were expected to end 2004 at about a 73.6 percent occupancy rate, up from 68.4 percent at the end of 2003, and average daily room rates were expected to end the year at $114.18, up 3.2 percent from 2003. By the end of this year, the average daily room rate is expected to climb over $118, with occupancy climbing to 74.9. PKF is predicting that RevPAR will be $88.88 in 2005, up from $84.06 in 2004 and $85.98 in 2000. Occupancy rates hit 78.3 percent in 2000, before dripping to as low as 67.6 percent in 2002. Average daily room rates, which peaked in 2001 at $112.28, continued to slide until picking up again this year. In its 2005 lodging forecast, PKF noted that the Valley saw a large amount of new supply in both the eastern and western sides from 2002 through 2004. There was a 0.8 percent increase in supply in 2004, and an expected one percent increase in 2005 as rooms are absorbed and the Hampton Inn & Suites opens in Burbank. Also scheduled to open in December of 2005 is the Westlake Village Hotel and Spa. The 20-acre complex will be a “well-being center” with medical facilities and physicians on site, along with a 267-room five-star hotel, spa and fitness center, and a TV production facility focusing on health and well-being programming. Baltin said that as the economy has picked up steam, business and international travel have both started to follow. “From 2000 to 2003, nothing was going on very much,” Baltin said. “Once business started to rebound, there was a pent-up demand for business travel, people had to do things.” Baltin said that international visitors are finding that their currencies carry more weight with the dwindling dollar, and they are becoming less worried about terrorist attacks in the United States. Michael Collins, executive vice president of LA Inc, the Convention and Visitors Bureau, said that occupancies at Valley hotels should jump even more than downtown hotels. Collins said that of the 22 million visitors to Los Angeles every year, half of them are visiting a friend or relative, and are more likely to stay near that person than to get a hotel room downtown or near the airport. Collins said that half of all visitors to Los Angeles are driving into the city as well, and that drivers are more likely to stay in Valley hotels. Asian travelers return The Asian market, Collins said, is returning to Los Angeles slowly. In years past visitors canceled travel plans because of a weak Japanese economy and the SARS outbreak. Next to Asia, the second largest international market is Europe. With the value of the dollar falling overseas, “it becomes almost fiscally irresponsible not to come to the United States,” Collins said. Some travel companies are offering European visitors “shopping trips,” designed to give tourists a weekend at some of the biggest shopping destinations in the country, such as the Mall of America in Minnesota. The British pound has a more favorable exchange rate with the dollar, but Collins said that even French and German tourists are finding that, including airfare, they can still save plenty of money by coming to shop in the United States. The Valley is also expanding its offerings to tourists with projects like the Studio City Walk of Fame. Installation of 300 granite tiles on the sidewalk of Ventura Boulevard began in August, remembering Studio City movies, television shows and actors. Also, the city’s newest park is located north of Calabasas. The Santa Monica Mountains Conservancy purchased the 2,983-acre Ahmanson Ranch for $150 million. The park contains 15 miles of trails open to the public. Lisa Barbagallo, director of marketing at the Hilton Woodland Hills said the hotel has seen its occupancy and room rates growing very well in 2004, and that most of the hotel’s business is being driven by local clients. “The corporate market is really strong,” she said. “It’s mostly domestic travel, we have some accounts that are international, but most travel is the local accounts coming in.” Barbagallo said that she’s seen some resistance from clients as rates have started to climb, but added that rates at all hotels are rising, and that the hotel is continuing to fill more rooms every year. “We’re thinking it’s going to be a really strong 2005,” she said.
Valley Hotels Planning for More Business