Anaheim officials were all smiles recently when a forecast of bed-tax revenue from Disneyland’s expansion showed the city was on track to reap at least $4.5 million in new annual revenue by 2005.
And if industry projections come to fruition, Anaheim may have more to smile about when it comes to meetings and conventions in the city. A financial analysis prepared by Berkeley-based Economic & Planning Systems Inc. and released in August by the city showed a 50% increase in demand for the city’s newly expanded Convention Center.
Already, Anaheim is seeing a surge in meetings, according to Tom Wood, assistant city manager. The total number of upcoming, booked conventions is at 874, up from a previous average of about 300 at any given time in the past, he said.
By 2005, the city could see annual demand for rooms during conventions increase 58% to 1.3 million, up from 823,330 in fiscal year 1999-2000, according to Economic & Planning Systems. The projection is based on a 2% growth rate per year after 2001.
Other industry sources say the meetings business is growing at a slightly faster clip, with some segments expanding at a much higher rate. That could play into Anaheim’s favor.
A 1999 survey by the Washington, D.C.-based American Society of Association Executives, whose membership includes meeting planners, showed that more than three-quarters of corporations and nearly all associations expected their number of meetings to continue at the same level or increase. The meetings business is growing at about 3% annually.
Trade shows are projected to expand at a faster rate,7% to 10%,according to industry publication Trade Show Week.
Any gains Anaheim might see from trade shows and meetings would be on top of a big jump in tourism. Economic & Planning Systems projects a 32% increase in room demand in the city attributable to visitors to Disney’s California Adventure and neighboring Downtown Disney by 2005.
The rosy projections are welcome news to Anaheim. For the past three years, the city has endured a slowdown in tourism and convention business as it has undergone a massive redevelopment that has snarled traffic, dislocated some residents and inconvenienced businesses.
As with any projections, though, there are caveats.
For one, unless the pace of hotel development in Anaheim picks up once California Adventure and the Convention Center are fully open, Anaheim’s nightly demand for rooms could outstrip supply. That could allow hotel operators to charge more for their rooms, but it also could deprive the city of additional revenue.
Economic & Planning Systems counted 12,703 rooms by totaling all facilities in the1,100-acre Anaheim Resort area that stretches from Disneyland to the Convention Center plus other full-service hotels in the city.
City officials said plans for 20,000 additional rooms have been approved, but only about half as many at best have been in the planning pipeline at any time in the past year. Only about 1,800 are certain to open during the first year of the new park’s operation, according to Business Journal estimates.
City officials said that only hotel projects with permits were included in the tax analysis. Still, sources said three of those in the report are iffy at best due to financial woes of the property owner.
One hotel under construction wasn’t included in the report,the 358-room Anabella Resort Hotel at Katella Avenue and Disneyland Drive. Construction began there in early August.
A second factor that could temper the growth of Anaheim’s bed-tax revenue is hotel development in neighboring Garden Grove.
While Anaheim’s Wood said the city has “tried to remove impediments” to building hotels, critics said Garden Grove has done a better job, offering special concessions to entice hotel developers to a stretch of Harbor Boulevard just a mile from the Convention Center and Disneyland.
A 170-room Hilton Garden Inn, 170-room Hampton Inn have opened in the area since mid-1999. A 380-room Crowne Plaza is set to open next month, a 167-room Homewood Suites by Hilton will open Nov. 1 and a 370-room Embassy Suites and 360-room Marriott Suites are under construction. The existing Hyatt Regency Alicante is doubling its number of rooms to more than 700 at the same intersection.
Anaheim officials point to city road, utility and landscaping upgrades as selling points for hoteliers looking at their city. But some industry watchers believe the city may have lost the opportunity to lure some lodging chains that have opened new hotels just down the road. Economic & Planning Systems estimates that 75% of the stays at the six new Garden Grove hotels will be generated by convention and Disneyland business.
Garden Grove hotels present another challenge for Anaheim: the city’s transient occupancy tax (more commonly known as the bed tax) is 10%, while Anaheim’s is among the highest in California at 15%. The higher rates at some Anaheim hotels could be a factor for leisure and family visitors.
But Garden Grove has a measure on the November ballot that would increase its bed tax to 12%, which, if approved, would minimize the bed tax differential.
Garden Grove also recently expressed concern about possible road and other improvements that might be needed when Disney announced its third park.
“We welcome the third gate,” said Catherine Standiford, deputy city manager of Garden Grove, “and we recognize the potential (it has) to benefit the city and region.”
Standiford said the concerns raised by the city were meant to simply send a signal that all potential impacts of such projects should be examined.
“We’re only doing what any public agency would do,” she said.
Still, occupancy at Anaheim’s hotels could surge when California Adventure and the Convention Center are fully open. This year, Anaheim’s year-to-date occupancy was at about 70% at mid-year, up from 68% a year ago. And as occupancy,and subsequently rates,climb, investors could find hotels a more attractive option again, leading to the completion of more proposed hotel projects.
Those projects could include 1,050 rooms in three hotels at the beleaguered $550 million Pointe Anaheim, a proposed 565,000-square-foot retail, dining and entertainment center across Harbor Boulevard from Disneyland that has faced numerous legal and financial hurdles since it was first unveiled in 1998.
And Bill Ross, VP of public affairs for the Disneyland Resort, said when the third gate was announced earlier this summer that officials there were looking at the possibility of a new hotel in the project.
A third gate for Disney could create an even sunnier scenario for Anaheim, as that plan was not included in the Economic & Planning Systems analysis. An environmental study for the third gate is under way, city officials said. At the time of the park’s announcement, Ross and city officials said the study would probably take about nine months to complete. The first phase, which many industry observers believe will be a water park, could open as early as 2003.
“We’re taking a break (in 2001), but there’s more to come,” Anaheim’s Mayor Tom Daly recently told a visiting audience of Latin American tourism professionals. n
