At a time when “resort” is almost a bad word, the county’s coastal and other upscale hotels are feeling a little left out.
The corporate meetings market largely has abandoned resorts in the wake of public outcry about lavish incentive meetings, like the one held by bailed-out American International Group Inc. at the St. Regis Monarch Beach last fall.
Meanwhile, leisure travel has stalled as the down economy has many people, even the wealthy, watching their pennies.
“The affluent have seen the biggest loss in net worth, so they don’t feel as wealthy and are equally mindful of budgets for travel,” said Peter Yesawich, partner at Orlando-based Y Partnership, a travel marketing and research company.
As a result, upscale hotels have lost more business than other hotels, Yesawich said.
Hotels and resorts in Orange County that typically charge more than $200 per night rented 20% fewer rooms in January and February than they did during the same months in 2008. Hotels with rates of $100 to $200 per night had an average drop in occupancy of 12.5%, according to Hendersonville, Tenn.-based Smith Travel Research.
According to the most recent data from the Los Angeles office of San Francisco’s PKF Consulting Inc., which tracks the hotel industry, overall occupancy rates for OC slumped to 59% for the first two months of this year, down from 68% for the same period a year earlier. The number of rooms rented in Huntington Beach and Newport Beach, which house several upscale resorts, slumped to 56%.
That’s in line with occupancy trends seen throughout the state and nation, according to Smith Travel Research, which measures a broader range of hotels than PKF Consulting does.
Impact on Wealthy
The affluent haven’t stopped traveling completely,more than 80% said they were planning one or more leisure trips this year in a Travel Horizons survey. But hoteliers contacted for this story almost unanimously agreed that hotel guests are looking for places closer to home that have good value and good service.
“During difficult economic conditions, (travelers) are looking for service and value,” said Giuseppe Lama, managing director of the Resort at Pelican Hill in Newport Coast.
According to the February Travel Horizons survey by Y Partnership and the U.S. Travel Association, 87% of the 2,200 respondents said they are likely to book a package to save money and 84% said they would spend less on those trips.
“There’s less demand overall,” said Richard Evanich, managing director for the Island Hotel in Newport Beach.
Some travelers plan to save more money by taking day trips or staying fewer nights.
Typical leisure trips last four nights; if leisure travelers trim just one night from each trip, the economic impact on a destination like OC could be significant.
The economic impact will be deeper if the number of annual OC visitors,there were 44 million in 2008,also shrinks.
Yesawich said the distance people are willing to travel is down to roughly a four- or five-hour drive from as much as eight hours in 2002 and 2003. And the number of people who say they’ll drive instead of fly to their vacation destination this year is up by about three percentage points from 2008.
Target Locals
These trends have forced many resorts to change their marketing tactics to attract California residents.
“Directing (marketing) efforts on a regional basis are a smart strategy right now,” Yesawich said.
Resorts such as the Hilton Waterfront in Huntington Beach and the Ritz-Carlton Laguna Niguel in Dana Point are turning their sights to e-commerce to quickly get the word out about weekend getaway offers or other specials.
“It’s a faster path to the consumer,” said George Munz, director of sales and marketing at the Ritz-Carlton.
Pelican Hill has the same thing in mind, targeting those within a one-hour drive or flight from Newport Coast.
The Ritz-Carlton is looking even closer to home.
“We have people come in from Tustin and Mission Viejo,” Munz said. “Staycation might mean stay home and go to a resort.”
Attracting a drive-in market means many resorts are seeing hotel guests stay for shorter periods.
So a number of OC locations are running promotions to try to entice guests to stay longer. Some are offering a free night with every two or three nights booked. Others rely on their service to get repeat guests instead of longer stays.
But others, such as the Montage Laguna Beach, are crossing their fingers that Southern California residents will use the money they save on plane tickets to extend their hotel stays.
“We’re getting some visitors for five or six nights at Montage who might have gone to Hawaii otherwise,” said James Bermingham, general manager of Montage.
Food, Drink Specials
Then there are the people who want to take day trips or just enjoy the comforts of resorts close to home.
Local enticements for that crowd include meal specials and happy hour drinks.
The Island Hotel added comfort food to its nightly menu. It’s also trying to get local office workers to stop by for the new Newport Beach social hour on weekdays. Under that promotion, visitors who arrive at 5 p.m. can get drinks, wine and appetizers for $5 each, those who arrive at 6 p.m. will pay $6 each and, you guessed it, those who come at 7 p.m. will pay $7 each.
The Resort at Pelican Hill encourages locals to book spa lunches, birthday parties or family reunions at the resort.
Though Pelican Hill opened just as the economy was crashing and has struggled to ramp up to its original first-year projections, Lama said the social business is doing well, with 50 weddings already on the books.
There were whispers about cutting rates to attract more guests at Pelican Hill and many of the finer resorts, but few discounts have been seen.
Don Wise, managing partner of global hospitality for Johnson Capital in Irvine, said cutting rates technically devalues the property.
“It’s always better to lose occupancy and retain rate,” Wise said.
Lower occupancy also creates less wear and tear on the resort and less demand for soft goods, which keep costs down.
“Discounting is for those without stellar service,” Pelican Hill’s Lama said. When resorts rate-cut, “it becomes a gas station war,” he said.
Some resorts rely on added value items such as free spa services or restaurant discounts with the stay, among other things.
“When you (add value), you maintain brand integrity and pricing integrity,” Bermingham said.
But in this case, integrity could come at a cost as resorts struggle to fill lost meetings business.
Many larger properties in Southern California rely on groups for 30% to 40% of their business.
“They’re probably not going to be able to make that up with leisure (travelers),” Yesawich said.
