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Hotel, Tourism Slump Expected To Continue Throughout Year

Hotel, Tourism Slump Expected To Continue Throughout Year

Retail

by Deborah Belgum

L.A.’s hotel and tourism business is likely to be slow for roughly another 10 months as it tries to recover from the effects of a downturn in the economy and Sept. 11, according to an industry study.

With fewer corporate travelers and conventions coming to town in recent months, the L.A. economy this year is expected to lose $2 billion in tourism revenue and $71 million in travel-related taxes, according to the California Mid-Year Lodging Report published by Ernst & Young.

“The fourth quarter will be a telling sign whether that 10-month prediction turns into seven months or 13 months,” said the report’s author, Jeffrey Dallas, a partner with Ernst & Young’s hospitality services group.

The report is based on research provided by Smith Travel Research and interviews Ernst & Young conducted with hotel owners and operators.

Hotels have been especially hard hit in Los Angeles. Their overall occupancy rate was down as much as 9.8 percent in February compared with the like period a year earlier.

Preliminary numbers for July show that hotel occupancy levels in L.A. County were down 5.4 percent from last year, according to PKF Consulting, which tracks the local hotel industry.

Hotels around Los Angeles International Airport had a particularly tough time because domestic passenger traffic was down 16.9 percent and international passenger volume was off 15.6 percent from January through July of this year.

Because of Sept. 11, the Los Angeles Convention Center had nine cancellations, and is operating at 73.3 percent capacity, a 4.3 percent decline from last year.

New Disney Suit

Shareholders of Walt Disney Co. have for the fourth time in the last month filed a class-action lawsuit against the Burbank-based entertainment company.

The L.A. law firm of Weiss & Yourman filed suit in U.S. District Court in Los Angeles on Aug. 23 on behalf of shareholders who held stock between Aug. 15, 1997 and May 15, 2002.

The latest complaint alleges Disney executives failed to notify stockholders about the potential financial effects of a pending lawsuit filed over merchandising rights regarding “Winnie the Pooh.”

“The lawsuits have no merit, and we’ll defend ourselves vigorously.” said Disney spokesman John Spelich.

Shareholders maintain Disney concealed the potential for a huge royalty pay out to family-owned Stephen Slesinger Inc., which licensed “Pooh” merchandise rights to Disney in 1961 and then sued Disney in 1991 for $35 million in royalties for under-reported merchandise sales.

Since Disney mentioned in its quarterly earnings report filed May 15 with the Securities and Exchange Commission that it might incur some financial loss from the Slesinger lawsuit, the price of the company’s stock has declined nearly 30 percent.

Sporting Woes

Sport Chalet Inc. in La Canada Flintridge is getting hit by an overall decline in sales at sporting goods chains across the country.

Its stock is trading near a 52-week low of $6.75, down 22 percent in the last five weeks, as earnings sank in the first quarter.

“All the major players missed their numbers,” said Joan Bogucki-Storms, a Los Angeles retail analyst with Wedbush Morgan Securities. “The weather was the worst we had in so many years. Sport Chalet is known for doing good winter business and people didn’t buy.”

Sport Chalet officials did not return calls.

To reduce its risk of being stuck with a lot of inventory again, the company has reduced its fashion-oriented sporting goods clothing and concentrated on more winter basic items that can be carried over to the next season, said Bogucki-Storms.

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

dbelgum@labusinessjournal.com.

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