If there ever were a time for a hotel to have half of its rooms out of commission, it’s now.
The Laguna Cliffs Resort and Spa in Dana Point is in the midst of a “multimillion-dollar” renovation that has halved its available rooms.
General manager Jim Samuels couldn’t be happier.
“We have created our own compression because I have 180 rooms shut down,” he said. “I’m operating a much smaller resort because of it.”
The 376-room bluff-top hotel overlooking Dana Point Harbor started an 18-month renovation last November, just as things worsened for many hoteliers.
“Although it wasn’t planned this way, the timing couldn’t have been better for us,” Samuels said.
Local four-star hotels such as the Laguna Cliffs are about 60% full this summer, down from about 80% a year ago, according to Irvine-based hotel consultant Atlas Hospitality Group.
Things are even worse at local five-star hotels, which are about half full. Occupancy at all hotels in the county is about 63%, down from 70% last year.
The Laguna Cliffs renovation was part of a long-term plan by owner Hartford, Conn.-based Cornerstone Real Estate Advisers LLC, part of Massachusetts Mutual Life Insurance Co.
The owner is looking “to get this property up to a higher level to compete with the newer hotels,” Samuels said.
The hotel vies for coastal resort visitors with pricier rivals such as the St. Regis Monarch Beach Resort and Spa and Ritz-Carlton, Laguna Niguel, both in Dana Point, and the Montage Laguna Beach.
Many of the county’s hotels,particularly posh coastal resorts,have seen a sharp decline in occupancy as visitors stay close to home and business travelers opt for cheaper hotels.
The county’s coastal hotels have laid off hundreds of workers in the past year.
“I’m pretty close to the general mangers of the Ritz-Carlton and St. Regis,” Samuels said. “Both of them have said to me that they wish they were under renovation right now.”
The Laguna Cliffs employs about 300 people, down from 360 a year ago. The hotel has felt the impact of the downturn but is “fortunate we have less inventory at this point,” Samuels said.
Convenient Timing
The hotel has seen more business travelers bypassing luxury resorts after the backlash over American International Group Inc.’s meeting last year at the St. Regis.
“With everything that happened with the AIG scandal, it’s a convenient time not to have a 5-star, 5-diamond label on your resort,” Samuels said.
The Laguna Cliffs is seeing another benefit to remodeling now: It is paying less than it would have a year ago as contractors have lowered prices during the downtown.
Owner Cornerstone had much of the financing in place before the downturn struck, according to Samuels.
“Even when the economy fell, we have not had to value engineer our renovation or stop it,” he said.
High Price
Cornerstone bought the hotel for $194 million in 2007.
At the time, the sale represented the high-est price per room in the county at $515,957.
The seller, Prudential Financial Inc., bought the hotel for $82.4 million, or $218,085 per room, in 2004.
The hotel was built in 1987. It is run by Virginia-based Interstate Hotels & Resorts Inc., an operator of independent hotels.
“This resort is a 22-year-old aging asset that needed a pretty good facelift,” Samuels said.
In the past, the hotel redid guest rooms, meeting space and its restaurant and added a spa.
The current renovation includes all 376 guest rooms and suites and the lobby.
Construction began in November on the first wing of the hotel and finished this month.
“We’re taking it down basically to the slabs and columns,” Samuels said.
The hotel also is redoing its pools to cater more to families.
It’s adding a “splash” zone for children with sprinklers, simulated surfing and a warm wading pool.
Laguna Cliffs’ renovation is expected to be finished by March 2010.
“If the economy doesn’t come back and I have my full complement, I’ll be sitting with everybody else wondering when this is going to end,” Samuels said.
