Less Room at the Inn Brings Glad Tidings

By Ed Moosbrugger

January 6 -- Santa Monica's tourism industry can expect solid, but not dramatic, gains in 2006 following a good year in 2005.

The city is coming off a year in which hotel occupancy rose only slightly, but lodgings were able to raise rates significantly.

"We anticipate that Santa Monica tourism will remain strong barring any unforeseen circumstances," said Misti Kerns, president/CEO of the Santa Monica Convention & Visitors Bureau.

"We expect business and corporate travel to remain strong with 3 to 5 percent growth overall in occupancy and room rates," Kerns said.

PKF Consulting forecasts that the number of occupied rooms will increase 2 percent in Santa Monica in 2006; the occupancy rate will rise to 78.5 percent from an estimated 77 percent in 2005; and the average room rate will increase 6 percent to $241.25.

For 2005, PKF estimates that hotel occupancy rose only 0.4 percent, and average daily room rates increased 8.2 percent.

Downtown hotels have seen improvement and expect more to come.
"Things are pretty steady," said Dino Nanni, general manager of Hotel Shangri-La. "It's looking like it's going to continue in the new year. Each year it's gotten better and better and better."

Robert Farzam, general manager of Best Western Ocean View Hotel, expects the hotel's revenue to rise 10 percent in 2006, with higher rates and occupancy.

"I'm getting a lot of advanced bookings," he reported. "I think the economy as a whole is doing better."

At Hotel Carmel, both occupancy and rates increased in 2005 and "everything looks promising," said General Manager Sherry Kellogg.

"It's got the signs of economic improvement for us," she said. Kellogg reported that 2005 was a very good year for the hotel.

Although Santa Monica visitor industry officials expect improvement in 2006, the increases won't come easily.

Kerns is keeping an eye on indicators such as consumer confidence, economic growth, holiday retail sales, gas and energy prices, and airline bankruptcies, noting that "the challenge now is to sustain our current numbers."

On the national level, the Travel Industry Association of America forecasts that the growth in travel spending will slow down in 2006 to 4.4 percent from an estimated 7.8 percent in 2005.

The good news for Santa Monica is that international travel to the United States is growing faster than domestic travel. Santa Monica relies heavily on foreign visitors.

"Our strongest markets continue to deliver, especially our number one market – the United Kingdom," Kerns said. "Australia/New Zealand continues to be strong as well as Germany.

"We are also starting to see more Canadians and Mexican travelers, and Japanese travelers are continuing to slowly but steadily increase," Kerns said.

The strength of the hotel market is reflected in the ability of Santa Monica hotels to significantly increase room rates.

Kellogg noted that demand has improved to the point where the hotel can put in some minimum stay requirements.

Reflecting the demand, the family that owns the Best Western Ocean View Hotel plans to tear down the Pacific Sands and Santa Monica Beach Travelodge motels at 1515-25 Ocean Avenue and 1530 2nd Street to build a larger motel, planned to be a Travelodge.

The new motel would have 164 rooms, compared with the combined 88 rooms at the two existing motels. There would also be about 3,000 square feet of retail space on 2nd Street and parking in excess of code requirements.

Co-owner Michael Farzam, who is the applicant on the project, said a study by PKF Consulting showed that a luxury hotel on the site would be more profitable, but that the owners are more comfortable with a moderately priced property.

"We've had a good experience with the Best Western," he said.

DOWNTOWN Santa Monica's vibrant food scene keeps attracting new business. Rocky Mountain Chocolate Factory is expected to open by Valentine's Day on Arizona Avenue in the spot formerly occupied by Table Manners, reported Craig Berrett of Muselli Commercial Realtors, who represented the lessee.