Hotel development in Orange County registered a small uptick in the past year, but it is still crawling along compared with the rest of Southern California.
There are 26 hotels under development in OC this year, compared to 24 a year ago and 12 in 2006, according to an initial report from Irvine-based Atlas Hospitality Group. The market tracker’s full report is due
in July.
The current projects will add 4,183 rooms to OC, bringing its total to nearly 60,000 rooms.
In all, there are 292 hotels in the works in Southern California, up from 287 last year. But OC’s share of the development is small potatoes compared with Los Angeles’ 67 projects, San Diego’s 63 and the Inland Empire’s 94.
Development is expected to decrease in 2009 as tough financing is slowing down the construction pipeline.
Projects “with 30% or 35% equity and 25% liquidity (will) get done if they have the right (hotel) brand,” said Don Wise, global hospitality industry managing partner for Irvine-based Johnson Capital. “Boutique, unbranded hotels are not going to happen right now.”
Nationwide, there were 5,807 hotel projects in the pipeline at the end of the first quarter with 779,307 rooms,a record high, according to Portsmouth, N.H.-based Lodging Econometrics, which tracks hotels.
The company projects that 1,190 hotels will open this year, adding 133,623 rooms nationwide.
Next year, 1,545 hotels are expected to open, adding another 170,417 rooms.
Slow Growth
But when hotel closures are added to the equation, the growth rate of rooms is less than 1%.
That kind of growth rate would normally have builders ramping up development of hotels. But with a weak economy and soaring gas prices, some hotel projects are being put on hold.
Newport Beach-based Tarsadia Hotels has temporarily shelved its plans for two up-scale hotels near the Anaheim Convention Center due to economic conditions.
Even though nightly rates and profitability have remained solid, Bjorn Hanson, managing partner of the global hospitality practice at PricewaterhouseCoopers in New York, recently called 2008 the “most difficult year I’ve faced for forecasting since we started in 1989.”
PricewaterhouseCoopers is forecasting a minuscule drop in overall occupancy this year of 0.8%, and a gain in 2009 of 0.5%, resulting in generally flat occupancy through next year.
So far this year, just six hotels have opened in all of Southern California, with a total of 962 rooms. The largest of those was Agua Caliente Casino Hotel in Rancho Mirage, with 340 rooms.
In OC, the lone hotel opening through June was the Hampton Inn & Suites in Seal Beach. The most recent phase of Newport Coast Villas, a timeshare resort, also opened in April, with the next phase scheduled for completion in 2009.
Timeshares are typically not counted as hotel rooms since they’re sold to buyers.
Set to Open
Hotels on track to open this year:
n The Renaissance ClubSport in Aliso Viejo, which will open the first week of July. The 174-room hotel is designed to blend the best of a full-service hotel and a sports club. It has a 75,000-square-foot fitness facility, a spa, 3,552 square feet of meeting space and other amenities designed to attract locals as well as visitors.
n The 204-room Inn at Pelican Hill will debut this fall, along with 128 ocean-view villas. Diverging from recent trends, this resort project has no timeshare or private residences. Its high-end service will include “personal travel designers” for every guest who will stock the bungalows or villas according to personal preferences before guests arrive. The resort also includes a Coliseum pool,136 feet in diameter that overlooks Pelican Hill Golf Course,a spa, meeting space in a separate building, an outdoor rotunda, restaurants and shops.
n The 242-room Worldmark by Wyndham, a timeshare resort adjacent to the new Anaheim GardenWalk on Katella Avenue is set to open this October.
n The 285-room Sheraton Garden Grove, on Harbor Boulevard south of Chapman Avenue, is still slated for completion this year, though construction has been slow.
Still on Track
OC projects in the works include:
n The 157-room Shorebreak Hotel Huntington Beach at the Strand by Los Angeles-based CIM Group is slated to open in early 2009 and will be operated by San Francisco-based Joie de Vivre Hotels. The company earlier this month also assumed management of Vacation Village in Laguna Beach.
Chief Executive Chip Conley said at a resort conference in April that the company plans to expand in Southern California.
n Newport Beach-based Makar Prop-erties LLC is building a W hotel at its Pacific City development in Huntington Beach that will be the first W hotel in OC. Current hotel plans call for 250 guest rooms and suites and 11,000 square feet of meeting space. The nine-story hotel also will feature a Bliss Spa, Sweat Fitness center, W Living Room, a full-service restaurant, a cafe and two bars. It will have two outdoor pools. The hotel is expected to open in 2010.
n The expansion of Disney’s Grand Californian Hotel at the Disneyland Resort is under way and will add 200 hotel rooms plus 50 two-bedroom villas that will operate under Disney Vacation Club, a timeshare program.
n Costa Mesa-based Ayres Hotels has four hotels in the works, including one in OC. The 89-room Mission Viejo Ayres Hotel and Spa next to an existing Ayres Suites is expected to open in 2009. The other three hotels are in Chino Hills, Moreno Valley and Redlands.
In Early Planning
Some announced projects are still in the early planning stages, but don’t have any plans to open before 2010. Included:
n Two hotels at Anaheim GardenWalk in development by Anaheim-based Prospera Hotels will add more than 800 rooms near Disneyland and the Anaheim Convention Center, possibly as soon as 2010, according to one of the principals. Those hotels,one an all-suite property,are likely to be managed by Walt Disney Co.
n GardenWalk also will have a 400-room Westgate Resorts timeshare attached to the retail, dining and entertainment center that officially opened June 14.
n Three hotels slated for Tustin Legacy Park are moving toward the development phase, according to Bob Olson of Irvine-based R.D. Olson Development. The hotels include a 180-room Kimpton (its first in Orange County), a 16-room Hilton Garden Inn and a 140-room Homewood Suites by Hilton. The operator for a fourth hotel planned at Tustin Legacy is expected to be announced this summer.
n The redevelopment of Aliso Creek Inn, operated by Montage Hotels & Resorts in Laguna Beach, is also in the early planning stages. The property sits in Aliso Canyon along Aliso Creek across the street from Montage Laguna Beach. Current plans by developer Athens Group of Phoenix call for 72 rooms at the inn, a spa and cottages. The nine-hole Aliso Creek Golf Course also would be realigned, along with restoration of a portion of Aliso Creek, a hiking trail, a historical component and private residences. Montage Chief Executive Alan Fuerstman said that homes are essential to make the project work financially.
On the Horizon
Several more tentative plans for hotels are on the drawing board for after 2010.
A proposed 90-room Headlands Resort Dana Point is at least two years away from breaking ground, a spokesperson said.
In San Clemente, a hotel tentatively planned for the Marblehead housing development would likely come even later. Homebuilding at the site has been delayed.
Other hotels listed as “in planning” by their respective city departments include a proposed Orange Hotel on City Drive in Orange, a Holiday Inn Express in Anaheim and two Springhill Suites (in Anaheim and Irvine). The Springhill Suites Web site lists no OC projects in development.
Two other sets of hotel plans were filed with the city of Irvine recently, but aren’t expected to get under way in the near future.
OC also has several hotels in the planning stage that may never see the light of day.
Carlson Hotels Worldwide of Minnea-polis nixed plans for a Country Inn and Suites in Anaheim in 2006, but the project is still listed on the books. The Aliso Viejo Golf Resort Hotel and Ritz Carlton at Park Place in Irvine (which is now up for sale) have been on the back burner for a decade. Marina Park Hotel in Newport Beach wasn’t approved by residents; and the North Beach Village in San Clemente is still facing scrutiny by the city.
But long languishing hotel projects have been known to resurface in the past and may do so again if the economy,and lending conditions,improve, industry watchers say.
Atlas Hospitality President Alan Reay said lenders need to relax underwriting criteria and interest rates need to remain low for development to ratchet up again.
“The fear of downward pressure on rates due to a recession needs to subside,” he said. “That will help lenders and developers become more aggressive.”
