Anschutz Entertainment Group plans to announce a midsize hotel project bordering L.A. Live in the coming weeks, amid a spike in interest by hotel chains in downtown Los Angeles.
The plans come as the L.A. sports and entertainment company’s chief executive, Tim Leiweke, is calling for thousands of new hotel rooms in the area to support the company’s proposed National Football League stadium and Los Angeles Convention Center improvements.
While receiving a Business Hall of Fame award from the Business Journal last week, Leiweke hinted at a coming announcement that would end speculation on “whether or not we’re going to build hotels.”
“We will not stop until we have 10,000 hotel rooms … that are directly attached and across the street from our Convention Center and in downtown Los Angeles,” he said.
There are about 6,000 hotel rooms in the downtown area, but more capacity is key to AEG’s plans for a 64,000-seat pro football stadium, which analysts say would need to attract convention business to pencil out.
The blueprint for the $1 billion stadium project, slated for the site of the Convention Center’s West Hall, which would be razed, includes a retractable roof that could be closed for conventions. Leiweke has also talked of AEG taking over operation of the Convention Center, owned by the city.
The new hotel is planned for an AEG-owned parking lot just north of L.A. Live at Olympic Boulevard and Francisco Street; it is entitled for up to 375 rooms. The company is in talks with a developer to either sell the property outright or to partner in a development, said AEG spokesman Michael Roth. The company expects to announce a deal in the next month.
AEG built the 1,001-room JW Marriott-Ritz Carlton tower, which opened last year across from the Convention Center at L.A. Live.
Roth, clarifying Leiweke’s remarks, said the company has no further plans to develop additional hotels on its own or in partnerships, but would rely on other developers to do so.
Downtown boosters and industry consultants say the NFL proposal has spurred interest from other chains looking to move into the area.
Carol Schatz, president of the Downtown Center Business Improvement District, said she has met with four hotel companies – two national chains and two boutiques – interested in moving downtown since the Feb.1 announcement that Farmers Insurance Group had paid $700 million for naming rights to the stadium, should it be built.
“They have expressed interest in possibly locating downtown as a result of the announcement of Farmers Field,” Schatz said.
Bruce Baltin, a consultant in the downtown L.A. office of hospitality consultancy PKF Consulting USA, said he also has seen increased interest, and has met with several hotel chains. Baltin, who previously worked with AEG on the JW Marriott-Ritz Carlton, said possible sites include several near the convention center as well as a site on Bunker Hill at Fourth and Hill streets.
“I can tell you pretty much all the major chains are looking downtown at this point,” Baltin said.
Viability
Major hotels downtown include the Westin Bonaventure on Figueroa and Fourth streets, the Sheraton on Hope and Seventh streets, and the Wilshire Grand on Figueroa and Wilshire Boulevard.
Baltin said he believed downtown could support the additional 4,000 rooms if the stadium and Convention Center project were to happen. The market easily absorbed the 1,001-room Convention Center tower last year, he noted, pointing out that the occupancy rate downtown at larger hotels was 63.4 percent last year, up from 60.4 percent the prior year, despite the flood of new rooms.
The city’s convention bureau has credited L.A. Live with drawing more convention business to Los Angeles. Organizations that have scheduled their annual conventions in Los Angeles this year include the American Heart Association and the NAACP.
Meanwhile, local industry figures are wondering what kind of hotel AEG is envisioning for its 375-room project. Jeff Lugosi, a partner at PKF, said the lodging could be successful, especially if it’s a focused-service as opposed to full-service hotel, of which there are many in the area.
Such a hotel would still attract professionals but feature lower room rates. The average room rate downtown hovers around $130 but reaches as high as $2,000 at the Ritz-Carlton and $750 at the business-class JW Marriott.
“It’s a segment that’s not represented in the market,” he said. “It would also capture some of the unsatisfied demand during peak periods that currently exist in the market.”
While AEG would like hotel commitments to come rolling in sooner rather than later, many chains are playing a wait-and-see game to see if the stadium materializes.
“I don’t know what their own thinking is about whether or not they would come here even if the stadium perchance didn’t get built,” Schatz said.
Jim Butler, a partner at Century City law firm Jeffer Mangels Butler & Mitchell LLP who specializes in hotels, agreed that AEG’s NFL stadium would boost hotel demand downtown. But he pointed to potential problems in timing.
“The question of room supply and demand is a bit of a chicken-and-egg problem,” he wrote in an e-mail to the Business Journal. “Without the demand generators and the room availability, it is hard to attract the traffic and business and to service it, and there can often be a delay between creating a demand generator like the stadium and the business it attracts.”
