Occupancy is starting to come up at Orange County hotels, but it hasn’t translated into higher room rates yet for hoteliers.
“It’s going to be gradual process,” said Brad Logsdon, director of sales and marketing at the 1,572-room Hilton Anaheim, the county’s largest hotel. “Even with the increase of demand, there is somewhat of a glut of availability out there still.”
Market watchers say another six to eight months of steady occupancy growth is needed before hotels can start charging more.
The market’s on the right track, according to the latest report by Nashville, Tenn.-based Smith Travel Research Inc.’s STR Global. Local hotels saw an 8.8% increase in occupancy in June compared to the same month a year earlier.
For the first six months of the year, occupancy stood at 66.7%, up 6.4% from the first half of 2009.
“Historically, as you come out of a decline, occupancy is the first thing to go up,” said Alan Reay, president of Irvine-based hospitality consulting firm Atlas Hospitality Group. “Owners have to build occupancy before they feel comfortable moving rates up.”
The downturn has proven to be good news for travelers looking for hotel room deals in the county.
“This is the ideal time for travelers who are looking to come to OC for either the theme parks or resorts,” Reay said.
OC’s average daily room rate this year was $105.39, down 5.4% from the same time a year earlier, according to STR. The daily room rate is a ways away from the peak 2008 rate of $123.74.
“Some OC markets already have flattened out in rate and stopped declining,” said Bruce Baltin, senior vice president in the Los Angeles office of Atlanta-based PKF Hos-pitality Research.
Leisure Bump
The uptick in travelers this year largely has been carried by leisure travelers, as corporate business is recovering slower (see story, page 19).
Some hotel operators feel more com- fortable increasing the rates slightly for vacationers.
“We’re finding working with travelers on value items in the hotel enables us to get the rate up a little bit,” Hilton’s Logsdon said. “The gap is narrowing in our favor though when it comes to room rate.”
Most agree the hotel market hit bot- tom about a year ago as people and busin- esses reined in their spending.
But few are willing to gamble on when the hotel market will fully recover.
“Expectations are (it) will occur around 2013 or so,” Baltin said. “Obviously that’s hard to predict that kind of moment that far out.”
Anaheim fared better than many other Cal-ifornia markets thanks in part to several citywide events including the Major League All-Star Game earlier this summer and the debut of a new attraction at the Disneyland Resort.
Anaheim has seen occupancy increase to 63% for the first six months compared to 57% occupancy for the same period last year.
Baltin expects it to go 3.6% higher this year as demand outpaces supply.
“It’s been a really good summer with a lot of short-term pick up,” Logsdon said. “Especially on the leisure side where we are seeing a couple hundred rooms picked up four to five days out.”
Some hotels have fared better than others.
“This month, (the Hilton Anaheim is) projecting about 85% occupancy, well above our original projections that were in the high 70s,” Logsdon said.
The Dana Point/Newport Beach hotel market is starting to gain some ground after being hit the hardest during the downturn.
It remains the second-most expensive average daily rate in California at $144 a night, after Santa Monica/Marina del Rey’s $194.60 average daily rate.
The market saw occupancy up 13.6% in June and rates flatten out after months of decline.
“It was the third highest jump in June of any major market we track,” Reay said. “People are feeling good about traveling again and, as a result, you’re seeing big jumps in particular markets like OC.”
Logsdon expects that feeling to continue until September, when he predicts occupancy will drop back down to about 50%.
“We’re starting to see a slowdown in some of the other areas of the economy and it’s unclear whether hotels are going to be resilient (enough) to carry on through the rest of the year,” Reay said.
Business Travel
A little boost is expected from corporate meetings, which are crawling back after a near standstill in the past few years.
“Business travel is coming back and we’re starting to see resurgence in the meeting business,” Baltin said.
Companies and meeting planners still are being very cautious when it comes to contracts though, Logsdon said. They are negotiating what businesses have to guarantee as far as the number of rooms or attendees and booking space later and later.
“People are being very cautious after they ended up owing the hotel hundreds of thousands of dollar for not meeting obligations last year,” he said. “They are working short term on the attendance they can bank on for that particular program.”
Hotels are keeping rates low for meetings.
“For businesses looking to hold meetings, it’s still very much a buyer’s market,” Reay said.
