By Ed Moosbrugger

July 20, 2010 -- Santa Monica's visitor industry, a vital part of Downtown's economic engine, shows increasing signs of recovering from the steep recession.

One key indicator: After many months of decline, hotel occupancy rates have been rising and room rates show signs of stabilizing.

That is welcome news because between 2006/07 and 2009 visitor spending in Santa Monica fell 5.6 percent, according to a study prepared for the Santa Monica Convention & Visitors Bureau.

“You are on the mend and leading many areas,” said Jeffry Lugosi, senior vice president of PKF Consulting, at the Santa Monica Travel & Tourism Summit, presented by the SMCVB in May. Lugosi believes the travel industry is on the upswing.

A recent report from PKF reflects that. For the first quarter of 2010, the hotel occupancy rate in Santa Monica rose 13.9 percent from a year earlier to 78.8 percent, while the average room rate dipped 2 percent, PKF reported.

In March, however, the average room rate edged up 0.6 percent, the first monthly increase from a year earlier since September 2008. The occupancy rate rose 14 percent to 84.6 percent, easily the highest among submarkets in Los Angeles County tracked by PKF.

“Certainly business has been healthier than projected,” said Wolfgang Jonas, general manager of the Fairmont Miramar Hotel at Wilshire Boulevard and Ocean Avenue. “We're seeing a major rebound in occupancy.” Room rates are holding steady or improving.

One of the driving forces for the Fairmont Miramar has been leisure travelers who are saving money by staying closer to home (within two to three hours driving time) for their vacations.

Corporate business also has improved, aided by business from media companies, Jonas said. Business from group meetings, which experienced a big drop during the recession, is up more than 30 percent this year, but is still well below normal levels for the hotel, he said.

At the Ocean View Hotel on Ocean Avenue, revenue has risen slightly this year, said Robert Farzam, chief operating officer of Ocean Avenue Management.

Ocean Avenue Management owns the Ocean View Hotel and the Shore Hotel Santa Monica, which is under construction and scheduled to open in summer 2011 at the Ocean Avenue site formerly occupied by the Travelodge and Pacific Sands motels.

The Ocean View Hotel, which had been keeping rates down to boost occupancy during the economic downturn, has been able to increase rates about $5 a room on average this year. The hike hasn't hurt occupancy.

“March was a great month,” with occupancy at 99 percent, compared to 97 percent a year earlier, Farzam reported. In May, occupancy was 95 percent, up slightly from 94 percent a year ago.

While signs are encouraging, there are still uncertainties.

“The signals are still mixed,” said Caroline Beteta, president and chief executive officer of the California Travel and Tourism Commission, at the Santa Monica travel summit.

The California tourism industry will continue digging out of the hole this year, and Beteta is even more optimistic about 2011. Still, there are possible roadblocks on the path to recovery, including a weak euro that could dampen travel from Europe.

Hotels have mixed opinions on how strong summer will be.

“We're comfortable that we will have a great summer this year,” said Jonas, who expects occupancy to exceed 90 percent in July and August.

Farzam isn't quite as sure about the outlook. “This summer doesn't look as strong as I thought it would,” Farzam said in early June. He's hoping that it's just a matter of people waiting longer than normal to make their reservations.

Santa Monica's visitor industry isn't just about how many people stay in hotels. It's also about day visitors and whether people are spending more or less than before.

The 2009 tourism economic impact report prepared for the SMCVB by Lauren Schlau Consulting & CIC Research Inc. found visitors are watching their pocketbooks.

While the total number of visitors to Santa Monica rose 13.5 percent to 6.33 million between 2006/07 and 2009, spending fell 5.6 percent to $1.16 billion. Day visitors (who spend less) and people staying in private residences led the increase in number of visitors.

Despite the dip in spending, the visitor industry remained important for Downtown.

The Third Street Promenade/Downtown area ranked second among local areas visited, at 75.2 percent. The Santa Monica Pier, at 84.9 percent, was first.

Unfortunately, visitors weren't spending as freely in 2009 as they did in 2006/07.

Shopping/gifts was the leading spending category, but fell 24.5 percent to $353.2 million. Meals ranked second, rising 8 percent to $234.4 million.

International travelers remain a crucial part of Santa Monica's visitor industry, accounting for $602 million in spending, according to the report.

The top international markets for Santa Monica in 2009 were the United Kingdom, Germany, Australia and western Canada.