Reservations About Summer

By Ed Moosbrugger

June 6 -- Santa Monica hotels are struggling just to keep even with last year as the important summer season gets underway.

While hotels are hoping for improvement during the peak summer months, there is still much uncertainty due to national and international developments.

“It doesn’t look good at all,” said Dino Nanni, general manager of Hotel Shangri-La. But Nanni is still trying to be optimistic, saying he hopes the drive market and weak dollar will help boost business.

Sherry Kellogg, general manager of Hotel Carmel, said she expects a noticeable increase in international business this summer compared with recent months. But that doesn’t mean business will be booming.

“Nothing can be worse than what we’ve experienced in the past few months,” Kellogg said.

War in Iraq. SARS. A struggling economy. Corporate belt tightening. Heightened national security alerts. All of these developments have discouraged travel.

“It’s really been tough,” said Paul Hortobagyi, general manager of the Georgian Hotel, who reported business is flat.

Despite the negative developments, Santa Monica hotels have held up relatively well. Santa Monica “is healthier than a lot of places,” said hotel consultant Bruce Baltin, senior vice president of PKF Consulting.

“Occupancy is down a little, but rates are up,” Baltin said, discussing results for the first quarter of 2003. “That’s not bad.” Santa Monica’s hotel occupancy rate through March was about 73 percent, which is pretty healthy, he said.

But results for March seem a little worrisome. PKF reported that Santa Monica’s hotel occupancy rate was 69.4 percent in March, down 6 percent from a year earlier and barely above the countywide rate of 68.4 percent. Santa Monica usually has an occupancy rate significantly higher than the county’s.

Through March, the city’s occupancy rate was down 2.9 percent, while its average room rate increased 3.9 percent. Santa Monica was one of the few areas in the region that showed an increase in revenue per available room in the first quarter of 2003, Baltin noted.

But for Downtown businesses that depend heavily on visitors, the occupancy rate is probably the most important number.

There are mixed signals as local hotels enter the summer season. Robert Farzam, general manager of the Best Western Ocean View Hotel, noted a strange pattern, with business in the first half of May down from April, which is a reversal of the normal pattern.

Farzam reported that both occupancy and room rates are down this year at the Best Western Ocean View, but he added, “We’re not at the stage where it’s horrible. It’s still okay.”

But another property he manages, the Pacific Sands, is barely at 50 percent occupancy, partly because it doesn’t have a name brand affiliation, Farzam said.

Baltin said the level of travel may increase slightly, but people are staying closer to home. For Santa Monica, which has relied heavily on international visitors, that trend is challenging.

Weakness in the U.S. dollar could provide an edge by making it cheaper to travel to the United States, but Santa Monica hotel operators say they haven’t seen any big impact yet. However, there are some positive signs.

“The weekends are getting a little better,” Nanni reported, indicating Santa Monica is picking up more of the drive market. And, he said, “More English are coming in,” which may indicate the weak dollar is beginning to have an impact.
“We’re being optimistic about it,” Nanni said. “We will pull through.”

Hotels are finding it increasingly difficult to predict how business will be because the reservations window has shrunk.