Hotel Operators Keep Fingers Crossed

By Ed Moosbrugger

Jan. 7 -- With the economy in expansion mode, Downtown Santa Monica hotels generally expect improved business in 2004 after an up-and-down year in 2003.

“We’re really looking at 2004 as sort of a breakthrough year,” said Jim Pedone, director of sales and marketing for the Fairmont Miramar Hotel. “There seems to be more confidence.”

Other hotel executives also expect improvement.

“I’m forecasting it will be better next year (2004),” said Robert Farzam, general manager of the Best Western Ocean View Hotel. “I’m optimistic.”

But hotel operators aren’t wildly optimistic.

Dino Nanni, general manager of Hotel Shangri-La, expects 2004 to be “a little bit better” based on advance bookings and good news on the economy.

At Hotel Carmel, General Manager Sherry Kellogg said it appears that advance reservations are picking up. Pedone agrees.

“It’s beginning to improve, but we’re not out of the woods yet,” Pedone said.

Lodging industry consultant Bruce Baltin forecasts increased business for
Santa Monica hotels in 2004.

Baltin, senior vice president of PKF Consulting, expects Santa Monica to post a 75 percent hotel occupancy rate this year, up about 1 percent from 2003 and for the average room rate to increase 3.5 percent.

Misti Kerns, executive director of the Santa Monica Convention & Visitors Bureau, said she is a bit more confident and thinks the occupancy rate could rise as much as 3 percent in 2004.

Baltin estimated that the occupancy rate was 74.3 percent in 2003, which was flat with 2002. But Santa Monica’s hotel activity actually grew in 2003 because there were more rooms available, he reported.

The average room rate increased 2.1 percent in 2003, Baltin estimated.

“This year (2003) was stronger than anticipated,” Baltin said, noting that the local market absorbed the new hotel rooms pretty well. Kerns said the midlevel and budget hotels have continued to do well.

Santa Monica benefited because some of the industries that help fill its hotel rooms, including the entertainment business, came back a little better than anticipated and the city probably also captured business from the local leisure drive market as people took trips closer to home, according to Baltin. Coastal cities as a whole did better than expected, he noted.

Santa Monica hotels had a somewhat bumpy ride in 2003, although hotels generally matched or exceeded 2002 activity. And even as 2003 drew to a close, hotels were reporting mixed results.

Business at the Fairmont Miramar was flat for the first three quarters of 2003, but picked up in the fourth quarter compared with 2002, Pedone said, leading to a gain for the year but not a dramatic one.

Farzam reported slow activity in the latter part of the year, but said that as of mid December business was about even with 2002, with occupancy up and average room rate down.

Kellogg said business hasn’t been as good as expected or hoped for. “It’s fluctuating from day to day, week to week,” she said. “All in all, most people are disappointed with the numbers.”

Nanni said the local drive market has picked up some of the slack from a decline in international visitors after 9/11 and foreign business is slowly picking up again.

“Things are looking brighter than in the past two years,” he said.

Individual hotels have experienced varying results from specific markets.

In the international market, travel from the United Kingdom and Germany seems to be recovering a little faster than other nations, Pedone said.

For Hotel Carmel, business has been particularly strong from Australia/New Zealand and Japan, Kellogg said.

In one sign of improvement, Pedone said that groups are beginning to book further in advance to assure accommodations, although the transient market still is fairly short-term in making reservations.

Still, the market has become more competitive, Farzam reported, leading hotels to offer more amenities to lure business. His hotel plans to start offering free high speed Internet access this winter, he noted.

Santa Monica hotels can look forward to a one-time boost this year when the American Film Market comes to town twice as it makes a transition to holding its annual trade show in November instead of February.

“That’s certainly going to help,” Kellogg said. “Everyone does very well when AFM is in town.”

Summing up the situation, Pedone said “Santa Monica is a strong market.” Which helps explain why the Fairmont Miramar wants to add rooms.