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Los Angeles Officials Blame Hotel Room Deficit for Slow Visitor Growth

Apr 23, 2014 11:30 am

Skift Take

The growth rate of hotel rooms and visitor numbers in big U.S. cities like NYC and Chicago outpace growth in LA making it difficult for the city to attract and then accommodate larger, more frequent groups and events.

— Samantha Shankman

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David Jones  / Flickr

The Los Angeles Staples Center. David Jones / Flickr


In the battle for tourists, Los Angeles is losing ground to rivals Orlando, Fla., New York, and Chicago.

L.A. County has broken its own record for annual visitors three years in a row — thanks to a rebounding economy, sunny California weather and popular tourist attractions.

But L.A.’s tourist numbers are not growing fast enough to keep up with the nation’s top three destinations, primarily because the city lacks enough hotel rooms to host more tourists.

“We have an awful lot of things that are in our favor,” said Robert Kleinhenz, chief economist at the Los Angeles County Economic Development Corp.

“But one big constraint I’ve seen in the last several years is that we don’t have enough rooms in the vicinity of the convention center.”

Kleinhenz and tourist industry officials closely follow visitation numbers for good reason.

Visitors to Los Angeles County booked 26.6 million room nights in 2012, spent about $16.5 billion and supported 324,000 jobs in the region, according to the Los Angeles Tourism & Convention Board.

Tourism has surged nationwide, thanks to a recovering U.S. economy and an influx of middle-class foreign travelers, particularly from China, Brazil, Japan and Australia.

Tourist numbers are rising especially fast in Chicago, New York and Orlando — so fast that those cities have recently revised their tourist forecasts up for the next few years. Tourism leaders in those cities attribute the growth to new efforts to promote their cities abroad, an improving economy, and construction of new hotels to accommodate visitors.

Chicago Mayor Rahm Emanuel recently predicted Chicago would host 55 million annual visitors by 2020, up from a previous forecast of 50 million.

“What we are seeing is that there is a rising tide,” said Don Welsh, president and chief executive of Choose Chicago, the city’s tourism bureau.

Former New York Mayor Michael Bloomberg has predicted that the city would reach its goal of 55 million visitors in 2014, one year ahead of the city’s previous forecast.

For its part, Los Angeles has set a goal of 50 million visitors a year by 2020, said Ernest Wooden Jr., chief executive and president of the Los Angeles Tourism & Convention Board.

Although Los Angeles has enjoyed a minor hotel construction boom in the last few years, Wooden said it is not enough.

In addition to the hotels already under construction or in planning, Los Angeles needs 2,000 to 3,000 hotel rooms within walking distance of the downtown convention center, he said.

“The barrier is having land in downtown that can be used for hotels,” Wooden said. “The city is trying to encourage hotel development.”

But the Anschutz Entertainment Group, the media giant that manages the convention center and owns Staples Center, said hotels should be cautious about building too fast.

“We are pleased to see over 3,000 new downtown hotel rooms in the pipeline, as continued growth in the supply of hotels is needed to support convention business,” said Ted Tanner, AEG’s executive vice president for real estate and development. “However, it is important to be mindful of the pace at which new hotels are built, as the risk of a failed project increases if new inventory comes on-line faster than it can be absorbed into the market.”

Los Angeles County is home to nearly 97,000 hotel rooms, but only 4,875 are within a mile of the convention center. The rest are in outlying areas like Pasadena, Santa Monica and Long Beach.

By comparison, Orlando has 7,695 rooms within a mile of its Orange County Convention Center, and New York has nearly 30,000 within a mile of the Jacob K. Javits Convention Center, according to those cities. Chicago has 1,539 rooms within a mile of its McCormick Place Convention Center but has 5,024 within two miles.

Los Angeles is lagging its competitors partly because it added hotel rooms at a rate of less than 1% a year from 1987 to 2012, about half of the national average, said Bruce Baltin, a senior vice president for PKF Consulting.

As a result, average occupancy rates in L.A. County jumped to a record high 78% in 2013. That means hotels near the convention center often are fully booked, forcing visitors to drive farther away from downtown to find a vacant room.

For example, the annual convention of the National Cable and Telecommunications Assn. meets in Los Angeles this month and is expected to draw about 12,000 attendees. The organization booked hotel rooms near the convention center for most attendees, but some were sent to hotels in Century City. “To find enough high-end hotels, we had to go outside of downtown,” said Joy Sims, a spokeswoman for the group.

“You get attendees who are grousing about taking a charter bus here and you get organizers who won’t come here because of that,” said Robert “Bud” Ovrom, executive director of the convention center. “It puts us in a competitive disadvantage.”

Several hotel developers have responded to the hotel demand in Los Angeles with massive projects that are changing the city’s skyline.

Marriott International, based in Bethesda, Md., opened the 1,001-room JW Marriott and Ritz-Carlton complex in 2010 next to the L.A. Live entertainment center. In June, Marriott plans to open another complex nearby on Olympic Boulevard that will house a 174-room Courtyard by Marriott and a 218-room Residence Inn by Marriott.

Marriott is also planning to build a 450-room Renaissance Hotel near L.A. Live by 2017.

“We are very bullish on Los Angeles,” said Tony Capuano, chief development officer for Marriott.

In addition, Chinese real estate developer Greenland Group is set to open a 19-story hotel complex with 350 rooms north of L.A. Live.

But the city needs even more hotels, officials say.

“The city is at an all-time high in occupancy,” Baltin said. “On any number of days, we are out of hotel rooms. We do need more rooms.”

Meanwhile, New York is undergoing a hotel construction boom that will help lodge a growing number of visitors. New York has been adding hotel rooms at a pace of about 3% each year since 2010.

The city now offers a total of about 98,000 hotel rooms throughout its five boroughs and expects to add about 6,500 new hotel rooms by the end of this year.

“It’s a rite of passage to visit New York,” said Chris Heywood, a spokesman for NYC & Co., the city’s tourism organization.

The nation’s top tourist destination is Orlando, home to Walt Disney World and Universal Studios Orlando. It drew 58.46 million visitors last year.

Tourism officials from other cities privately grouse that Orlando’s numbers are unfairly inflated by counting visitors to other places in Orange County and portions of two adjoining counties.

That may explain why New York calls itself the nation’s top “big city” destination.

Wooden said he is not bothered that New York, Chicago and Orlando are surpassing L.A. in total tourism numbers. But he is not counting out Los Angeles from eventually gaining ground on its competitors, especially with an expected surge in visitors from China and the Pacific Rim.

“We are on our way to 50 million visitors, and we might even surpass it,” he said. “You are always trying to be No. 1.”

(c)2014 the Los Angeles Times. Distributed by MCT Information Services.

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