2002 Brings Little Relief as Slump at Hotels Continues

Retail

by Deborah Belgum

Despite numerous high-profile meetings and conventions at the beginning of the year, hotel occupancy remained weak in January.

One of the hardest hit areas was downtown L.A., which continues to be affected by a slump in business and international travel.

In preliminary figures released by consulting firm PFK Consulting, downtown hotels had a 49.8 percent occupancy rate in January, compared with 62.3 percent in January 2001 (though it’s almost double the rate in December).

Also hit was the area around Los Angeles International Airport, where several large hotels are located. The airport hotels had a 51.7 percent occupancy rate in January, compared with 76.9 percent a year earlier.

Two areas that did well were Hollywood, which late last year saw the opening of the Renaissance Hollywood Hotel on Dec. 26, and Pasadena, which hosted the Rose Bowl game on Jan. 3 instead of Jan. 1. This kept holiday visitors in the city a few extra days.

Pasadena hotels had a 78.3 percent occupancy rate in January, up from 68.5 percent in January 2001. Hollywood hotels had a 58.3 percent occupancy, compared with 52.7 percent in January 2001.

The hotel industry is expected to start improving this year, “but it will be very slow,” said Bruce Baltin, senior vice president at PKF Consulting.

Torrid

Eleven months after opening, the Torrid chain for large-sized girls has been a drag on the fast-growing Hot Topic Inc. youth-oriented fashion retailer.

“Right now Torrid stores are not profitable. And we said we would lose a few cents a share this year because of them,” said Jay Johnson, senior vice president of strategic analysis and investor relations. “We expect to break even in the third quarter of 2002, and then we believe they will become profitable after that.”

The $336 million Industry-based Hot Topic has six Torrid stores and 15 more are scheduled to open this year.

Johnson said the Torrid division has faced start-up costs that include designing a music-oriented store concept for the Gen X and Gen Y customer who wears a size 14 to 26.

Analyst Jennifer Black of Wells Fargo Securities believes that Torrid stores are the hottest retail concept in the market and should provide good growth for Hot Topic in the long term.

Torrid is just a small part of Hot Topic’s retail line-up. There are 349 Hot Topic stores nationwide, with another 70 to be added this year.

Hot Topic reported net income of $8.5 million for the third quarter ended Nov. 3, up from $7.3 million in the like year-earlier quarter. For the 13 weeks ended Feb. 2, same store sales were up 3.8 percent compared to the corresponding 13 weeks last year.

Staff reporter Deborah Belgum can be reached at (323) 549-5225 ext. 228 or at

[email protected].