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Hotel Building Swings From Strong to Stalled

After years of planning and a project cost topping $150 million, the JW Marriott Anaheim Resort was expected to open near the end of February to great demand, as the first four-diamond property in the area in nearly two decades.

Amid the ongoing closure of Disneyland and a shrunken visitor pool, the 466-room property next to the Anaheim Gardenwalk shopping center has yet to open three months after wrapping construction.

“It’s been devastating to us, and all of the employees that work in the resort,” said Bill O’Connell, whose Anaheim-based O’Connell Hotel Group developed the hotel with Orange-based Prospera Hotels Inc.

The JW Marriott is one of several new hotels that have delayed their opening as a result of the coronavirus, which has largely wiped out the Anaheim resort’s visitor base, a figure running close to 25 million in 2019, and kept the county’s main tourist attraction and largest employer closed since March 14.

Disneyland’s reopening is seen as the key to getting resort-area hotels back up and running, and there’s hopeful signs the wait won’t be too far away.

Optimistic industry watchers say an opening could occur as soon as next month, though the Burbank-based media company has yet to reveal any plans to do so.

“Almost every hotel in the resort area is closed, and everyone is waiting for Disneyland to open,” O’Connell said.

Disney will start a phased reopening for its Orlando resort on July 11, which could be used as a model for the Anaheim reopening, sources indicate.

County and Anaheim business leaders tell the Business Journal that they will soon be seeking guidance and permission from the state to move into Phase 3 of reopening.

That will allow hospitality businesses and leisure travel to restart, and will begin the process by which theme parks can submit plans for reopening.

Standstill

As new hotels sit empty, many additional planned hotels for the area—just months ago thought as a needed addition to a tourism district that has been adding more visitors each year—have stopped in their tracks.

Along with the JW Marriott, O’Connell Hotel Group and Prospera’s plans for development next to the GardenWalk shopping center also included a proposal for a second hotel, this one to run at least 350 rooms on Disney Way.

“Now, we don’t know if that will ever be built,” O’Connell said.

At the end of 2019, there were 69 hotels with 11,048 rooms in planning in the county, up 7% from 2018, according to Irvine-based hotel consultancy and brokerage Atlas Hospitality Group.

While hotels that have started construction are likely to complete on time, or at least close to their original schedule, those that have not yet started construction or received proper financing are likely to be stalled or canceled altogether, notes Cameron Lamming, chief development officer of Hostmark Hospitality Group, a hotel investment, management and consulting company that acquired San Diego-based RAR Hospitality earlier this year.

“New construction is pretty much at a standstill,” said Lamming, who is based in Orange County.

He speaks from experience—he owns an under-construction hotel that’s on track to open in San Diego this fall, while a new hotel project that had yet to kick off construction in Los Angeles has been stalled after the lender pulled the plug.

New Luxe Additions

Atlas Hospitality Group founder Alan Reay said banks are “not actively looking to make new hotel loans in this market, and they’re certainly not looking to make construction loans.”

“California hotels were on a very steep curve in 2018 and 2019 across the board, with increases in under construction, planned and opened properties,” Reay said. “That momentum is lost.

“New projects going under construction will show a steep decline, and it will take a while for that to recover.”

Reay is more optimistic about the projects currently under construction in the Anaheim market, with the market home to “much more experienced developers.”

The ranks of experienced firms in the area include Irvine-based R.D. Olson Construction, which is building a 223 room, dual-brand Hilton in the resort area on behalf of owner Nara Investments; and Anaheim-based Wincome Group, currently building the Westin Anaheim Resort.

The Westin property, along Katella Avenue and next to the convention center, is the largest hotel under construction in Orange County with 613 rooms.

The property is also the second new four-diamond resort planned for the market, and is on schedule to open in October, its executive team said last week.

“We haven’t had any construction delays from coronavirus,” said Wincome CEO Paul Sanford.

New Market

The Westin and JW Marriott, which along with a Radisson Blu nearing completion are the first four-star luxury hotels in Anaheim not on Disney grounds, will “hopefully cater to a new market that wasn’t staying in the area before,” Reay said.

Combined, they will employ north of 800 employees.

“Recruiting has gone very well for the resort, and it’s been highly anticipated as one of the nicest four-diamond Westin resorts that’s been built in many years,” Sanford said of his project.

Wincome also has plans to redevelop the Anaheim Hotel at 1700 S. Harbor into a 580-room luxury hotel that could add another four-diamond resort to the area.

Early plans called for a 2020 construction start, though Sanford said the company is pushing that out in order to gauge demand, not just in the wake of coronavirus, but also to see how the new luxury hotels are performing.

“We want to wait at least a year after the Westin is finished to understand how it performs, as well as the JW Marriott,” Sanford said.

“Our development extension doesn’t require us to begin construction until 2025, so we will take our time to make sure we bring the right product and brand to the market.”

Coastal Success

Anaheim’s reliance on Disneyland and conventions and meetings has made it more susceptible to the coronavirus-inflicted downturn than coastal markets, some of which have already started to see upticks in business.

“Many hotels along the coast have opened up in recent weeks to meet new demand from travelers from Los Angeles,” said Cameron Lamming, chief development officer of Hostmark Hospitality Group.

Alan Reay, founder of Irvine-based hotel brokerage and research firm Atlas Hospitality Group, said new demand is also coming from residents looking for a staycation who would alternatively be traveling to Hawaii, which is under more stringent shelter-in-place mandates.

“Coastal hotels are already starting to fare a lot better, with many projecting that these properties will do very well for the remainder of the year,” Reay said.

Newport Beach’s Lido House, a development of locally based R.D. Olson Development that opened two years ago, was fully booked for Memorial Day weekend and the following weekend, Chief Executive Bob Olson told the Business Journal late last month.

Newport Coast’s Pelican Hill is also open and drawing good business; the Irvine Co.-run resort opened its golf course to members and resort guests a few weeks ago.

“Anaheim will go through a rough patch for some time, as meeting and corporate business is likely to take longer to return than leisure travelers,” Reay said.

—Katie Murar

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