Staff Reporter

After a decade of inactivity, hotel development has once again roared to life in Los Angeles.

The new wave of building is being driven by several factors most importantly, the number of travelers to Los Angeles is at its highest level since the early '90s, and hotel occupancy and room rates are at their highest levels in more than 15 years.

Among the projects under development are a 175-room luxury hotel on the beach in Santa Monica (set to open later this year), Santa Clarita Valley's first high-end hotel (opening this summer), and no fewer than five Long Beach hotel projects.

In addition, developer Majestic Realty Co. confirmed that it likely will move forward with a plan to build the long-awaited downtown Convention Center hotel by the end of the year. Universal Studios Inc. is pushing an expansion that calls for two new major hotels to be built adjacent to its theme park, and a $20 million renovation of a 115-room wing of the Regent Beverly Wilshire is underway.

"A number of people are looking at hotel development in various parts of the region," said Bruce Baltin, senior vice president of PKF Consulting, which tracks the hotel industry. "The market's strong, it's continuing to be strong, and there's a lot of interest."

For the first four months of 1998, L.A. had a countywide average hotel occupancy rate of 75.6 percent up from 74.7 percent for like period last year. The average daily room rate for that same period was $110.50, up 9.4 percent from a year ago.

The number of overnight visitors to Los Angeles in 1997 reached 23.6 million, the highest number since 1990, according to the Los Angeles Convention and Visitors Bureau. This year, the bureau expects 23.9 million visitors to L.A.

What's happening in Los Angeles is being seen in cities all over the country, as a robust economy and an earlier slowdown in hotel development have combined to create an exceptionally tight summer season.

"People are finding they can't get into the hotels, especially in Beverly Hills. We find we're selling out sooner than we used to," said Peter O'Colmain, vice president and general manager of the Regent Beverly Wilshire, who has added three staff members to handle reservations.

"Effectively, once you get above 70 percent occupancy, it's really hard to get beyond that," added Baltin. "For hotels, 75 percent is a very strong capacity."

Hotel development is largely a cyclical business, and the current round of building tends to fit the pattern. The question, of course, is will travelers to L.A. fill the new rooms, or will occupancy and room rates eventually start to fall, as happened a decade ago?

"The number of rooms added at the tail end of the 1980s was huge tens of thousands of rooms," said Baltin. "What you're talking about this time around is much more conservative. The people both lending and developing today seem to be a little bit wiser than last time around, a little more experienced."

Added Bob Moore, executive vice president of sales and marketing for the L.A. Convention and Visitors Bureau, "I think this next wave of development is going to be more conservative than the last one. The '80s were very painful to most cities."

Among the first developments in this current round is the Le Merigot Beach Hotel. The nine-story, 188-room project is being built on the beach in Santa Monica between Loews Santa Monica Beach Hotel and Shutters on the Beach. It is being developed and managed by Columbia Sussex Corp., a Kentucky-based hotel developer and operator.

The $30-million property, scheduled to open in December, will be the last beachfront hotel allowed in Santa Monica because a ballot measure passed by city residents in 1990 put a moratorium on such projects. The Le Merigot was approved under a previous developer prior to the ordinance's passage.

Bruce Rathje, vice president of sales and marketing for Columbia Sussex, said Santa Monica's popularity among travelers was a compelling reason for developing the hotel. For the first four months of this year, the city had an 81.6 percent hotel occupancy rate and $155.50 average daily room rate.

The fact that no more beachfront hotels can be built in Santa Monica also made the project attractive.

"The market was very strong, the project was available, and the zoning restrictions made it such that there would be no new competition there," Rathje said.

Local market strength was also a compelling reason for Newhall Land and Farming Co. to pursue its development of the Hyatt Valencia hotel in the Santa Clarita Valley. The 250-room hotel, which will be operated by Hyatt Hotels & Resorts, is being built in an area devoid of high-end hotels.

"There is no full-service, first-class hotel in the Santa Clarita Valley," said Marlee Lauffer, spokeswoman for Newhall Land. "We had been planning to build one for some time, and this is the perfect location for it as part of our Town Center Drive development."

Town Center Drive is a mixed-use, Main Street-like assortment of stores, offices and movie theaters being built near the Valencia Town Center shopping mall. The $38 million Hyatt Valencia on Town Center Drive is fully constructed, and its interior is being completed.

The hotel is expected to open Aug. 1 and will depend heavily on the nearby Six Flags Magic Mountain and Hurricane Harbor amusement parks, as well as a growing number of businesses in the Santa Clarita Valley. Princess Cruises, for example, is moving its 700-worker customer service operation from Century City to a site near the hotel this year, meaning out-of-town executives doing business there will likely stay at the hotel.

The largest number of hotels is being proposed for Long Beach, where five properties are in the planning stage, said Linda Howell DiMario, president and chief executive of the Long Beach Area Convention and Visitors Bureau.

Two of those are large hotels planned for sites adjacent to the Long Beach Convention and Entertainment Center, one with 750 rooms and one with 430 rooms. In addition, two smaller, boutique hotels two with 200 rooms each, and one with 45 rooms are planned for other areas of Long Beach.

The new hotels will accommodate tourist attractions that have opened or are opening soon in Long Beach, including the Long Beach Aquarium of the Pacific and the Queensway Bay retail area, the first phase of which will be completed by next summer.

"People are seeing the whole energy change," she said. "We are taking on the 'destination' perspective that we had always hoped for and planned for, and I think people are sensing that."

Kam Babaoff, managing director of Rokmar Capital LLC, which is planning to build a 430-room Marriott hotel near Long Beach's Convention Center, expressed concern that the looming wave of hotel construction could flood the Long Beach market with too many rooms, as happened in the late '80s and early '90s. "We're always worried about that," he said.

In other parts of Los Angeles, the long-awaited hotel adjacent to the L.A. Convention Center is still being talked about, but is not yet on the drawing board.

John Semcken, vice president of City of Industry-based Majestic Realty, one of the developers that has expressed interest in such a hotel, said a plan likely will be put together before the end of the year.

"We do recognize that there's been a great deal of interest to build a hotel there," he said. "We've been approached by all the name hotels, who want to be involved in building the Convention Center hotel."

Majestic is especially interested in the project because it is a partner in the new Staples Center arena now under construction adjacent to the Convention Center.

In Universal City, two hotels each with as many as 600 rooms and 40,000 square feet of meeting space are planned as part of the expansion of Universal Studios' theme park and sound stages. However, its master plan is still working its way through the Los Angeles county and city planning commissions a process that has been extended by local homeowner opposition. A Universal Studios spokeswoman said no timeline has been set for the hotels' construction.

In addition to new hotel construction, existing hotels throughout Los Angeles including the Summit Hotel Rodeo Drive and Omni Los Angeles Hotel & Centre are undergoing major renovations.

Perhaps the most dramatic renovation is the one currently underway at the Regent Beverly Wilshire. That project involves 115 rooms that have been off the market for more than a decade.

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