In a sign that L.A.’s hospitality industry is checking back in to good times, hotels are investing millions in new buildings and in keeping marquee properties looking their best.
Several of the region’s largest establishments are in the midst of multimillion-dollar projects. That’s because hotel owners, who held on to their cash during the downturn, are now more likely to reinvest in their properties as occupancy and average room rates are on the rise, according to industry watchers.
For example, the Long Beach Marriott, which ranks No. 56 on the Business Journal’s list of 100 largest hotels in Los Angeles County, has been undergoing an $11 million renovation. The hotel completed an overhaul of its 300 rooms last year and began making improvements to its public spaces in February.
Michael Robby, Marriott director of sales and marketing, said the hotel began planning its renovation project several years ago, but the recession delayed the work, especially a $4.5 million upgrade of its grand ballroom and other meeting spaces.
“When we saw a little bit of a downturn in the late summer and fall of 2008, that definitely pushed off the second phase until we got to a point here in spring of 2011 when we were able to green-light that project in its full capacity,” Robby said.
Hotels typically need to be renovated regularly due to wear and tear, but owners cut back on significant expenditures during the downturn, according to Alan X. Reay, president at Irvine consulting firm Atlas Hospitality Group.
“Hotels that should have done it three to four years ago are now forced to do it,” Reay said. “Hotels typically need to be renovated every four to five years and there’s very little renovation that’s gone on because people didn’t have the disposable income.”
Downtown’s Omni Los Angeles Hotel, No. 27 on the Business Journal’s list, completed a $15 million renovation last month. The last time the Omni underwent a renovation of such size was when its current owner, TRT Holdings Inc. of Irving, Texas, purchased the property in 2000.
“Clearly when times are difficult, it’s difficult for owners to invest back into their properties because they are just trying to survive,” said Kathy Faulk, the Omni’s general manager.
Faulk said that the owners see a favorable economic climate, adding that downtown’s ongoing renaissance, led by last year’s opening of the JW Marriott and Ritz-Carlton hotels at L.A. Live, is pushing other hoteliers to upgrade their properties.
“They are plugging back into their buildings to try and be a part of this very interesting dynamic that is now happening in downtown Los Angeles,” she said.
Other downtown hotels getting facelifts include the Westin Bonaventure Hotel & Suites, which holds the No. 1 spot on the Business Journal’s list with 1,354 rooms. The Bonaventure is investing $35 million in upgrading its meeting spaces, lobby and guest rooms; renovations are set to be finished by the summer. The Los Angeles Marriott Downtown, No. 25 on the list, is planning an overhaul of its public spaces and 469 rooms that’s set to begin later this year.
There’s more development in the works downtown, too. Plans were announced last month for a 22-story, 377-room hotel across the street from L.A. Live. It is to be operated under the Residence Inn by Marriott and Courtyard by Marriott flags.
Meanwhile, Korean Air and downtown L.A.-based developer Thomas Properties Group Inc. are planning to demolish the Wilshire Grand Los Angeles, No. 5 on the list, in 2012. The 900-room hotel is set to be replaced with two high-rises with 650 hotel rooms and 100 luxury condos.
The activity comes as the hotel market is showing signs of a strong rebound. Occupancy rates in the county rose to 75 percent in February, up from 69 percent in the same month last year, according to the most recent data from San Francisco-based Colliers PKF Consulting USA. Revenue per available room, a key metric of the industry’s financial health, jumped 22 percent to $117 from $96 for the same period.
“The L.A. hotel market is definitely on the road back to recovery,” said Bruce Baltin, senior vice president in the downtown L.A. office of Colliers PKF. “The downturn in 2009 was very dramatic, and coming into 2010, there was a lot of pessimism as well. But 2010 turned out a lot better than people expected.”
The industry doesn’t formally track renovations, but Baltin and Reay said they are seeing more hotel renovations now.
Fresh face
Hotels outside of downtown are getting upgrades as well.
The 613-room Crowne Plaza Hotel Los Angeles International Airport, No. 12 on the list, spent $3 million on renovations.
Michael Payton, general manager at the Crowne Plaza, said the hotel undertook the upgrades in an effort to keep its regular customers from staying at other hotels.
“The market is so competitive,” Payton said. “So we are doing it to maintain the business we have.”
Four Points by Sheraton Los Angeles International Airport, No. 16 on the list, is completing a $12 million renovation. Local hotel and nightclub owner Sam Nazarian took over operations of the property in 2009, when the downturn took its toll on his other hospitality ventures. The hotel is owned by Nazarian’s family.
“The spending of money is a good sign,” said Phil Baxter, general manager at Four Points.
While some hotel owners are pouring money into freshening up their properties, others are building new ones.
Santa Monica’s Shore Hotel, a 164-room, $62 million boutique hotel set to debut this summer, is under construction on Ocean Avenue near the Third Street Promenade and Santa Monica Pier. It’s replacing the Pacific Sands Motel and the Santa Monica Beach Travelodge, budget properties that were razed last year.
The Shore will include a meeting space, fitness center and pool. Room rates are expected to start at $250 per night.
Steve Farzam, whose family owned the two motels since the late 1990s and will operate the Shore, said he’s hoping the hotel will serve as a middle ground to Santa Monica’s higher-price luxury hotels and inexpensive motels.
“You get the lower end or the higher end,” Farzam said. “We wanted to have a boutique hotel.”
Colliers PKF’s Baltin said Santa Monica’s hotel market is recovering as corporate and leisure travelers are returning to the area, and the Shore is likely to see good business as the region continues to rebound.
“It’s opening into a strong market,” Baltin said. “And given how high the room rates are in Santa Monica, the Shore will come off as a more affordable alternative.”
Farzam and others are also bullish on L.A.’s hotel market.
“A lot of owners are now more willing to put money back into their hotels because revenues are improving,” Reay said. “And it’s a huge endorsement that the hotel market has rebounded.”
Checking In
Here’s a look at some of the local major hotel renovation projects.
Westin Bonaventure Hotel & Suites
Downtown Los Angeles
The hotel is completing a $35 million renovation, including new carpet, light fixtures and curtains in guest rooms. The upgrades include improvements to meeting rooms, the lobby and other public spaces, as well as a redesign of lobby fountains and hotel entrances.
Crowne Plaza Hotel
Los Angeles International Airport
LAX-Century Corridor
The hotel spent about $3 million replacing the furniture, carpeting, wallpaper and amenities in 240 of its rooms. It plans to spend $4.8 million to rehab the remaining 373.
Four Points by Sheraton
Los Angeles International Airport
LAX-Century Corridor
The hotel renovated its meeting spaces, pool area, restaurants and other public areas last year. Its 567 rooms are being updated with new furniture, bedding and amenities such as bathroom vanities.
Omni Los Angeles Hotel
Downtown Los Angeles
The hotel spent $15 million on an overhaul of its 453 rooms, including new furniture, bedding and bathroom amenities. It also upgraded meeting spaces with new art and other additions, and redid the menu for its restaurant, Noe.
Long Beach Marriott
Long Beach
The hotel spent $6.5 million last year overhauling its 300 guest rooms, including new furniture, flat-panel LCD TVs, and iPod and iPhone docking stations. Workers are making $4.5 million in improvements to the hotel’s 6,000-square-foot grand ballroom and other meeting spaces. The upgrades include new lighting and sound systems, and the addition of a 1,700-square-foot courtyard attached to the ballroom.
