Officials expect long economic recovery
As the one-year anniversary of the Sept. 11 terrorist attacks approaches, the local hotel industry remains worse off and will likely lose millions of dollars by the end of the year.
Many hotel managers report that despite slashing room rates, occupancy levels for this week will hit an all-time low. Some hotel operators have decided not to cut their rates and instead are having a “quiet week.”
And while Santa Monica won’t resemble a ghost town on Wednesday, the number of tourists in town for the week will be at its lowest in years, officials said.
“It’s terrible,” said Paul Hortobagyi, general manager of the Georgian Hotel, located at 1415 Ocean Ave. “That’s the best description I can give you.”
To drive occupancy levels up, many hotels have been forced to cut their room rates by more than 25 percent from what they were charging last year. Most hotel managers wouldn’t reveal how much those prices have been cut for competition reasons.
For most hotel operators, this Sept. 11 will be a stark reminder of the downturn in travel and tourism that has taken place over the past year.
While local occupancy levels for the entire year have risen slightly, room rates have been slashed so low that hotels’profit margins are shrinking.
“It’s going to cost us about $2.5 million this year,” said John Thacker, general manager of Loews Santa Monica Beach Hotel, located at 1700 Ocean Ave. “That’s mostly from average (room) rate loss.”
From January to June of this year, luxury hotels have dropped their room rates by more than 10 percent, which has raised occupancy levels above last year’s by more than 4 percent, according to a report by PKF Associates, a national travel industry firm.
For many of Santa Monica’s less expensive hotels, the loss in tourism has been less damaging. Those hotels have had a 4.6 percent decline in average hotel room rates, while they’ve experienced an increase in occupancy by nearly 5 percent, according to a report by Smith Travel, which monitors national tourism trends.
That will likely translate into another difficult budget year for the City of Santa Monica, which depends heavily on the taxes it collects on hotel rooms, officials said.
The city already had to suspend more than $20 million in capital improvement projects and cut several million dollars in operating expenses to balance this year’s budget. And officials are fearing next year will be more of the same.
Compared to other cities in the region and nationally, Santa Monica has fared better than most, said Misti Kerns, executive director of the Santa Monica Convention and Visitors Bureau.
“I think Santa Monica rate-wise has adjusted slightly down, which opens us up for people who thought we were too expensive before to come and check us out,” she said.
But recovery is a long way down the road, Kerns said. Travel patterns similar to those in 2000 — which is considered the peak of the last decade’s economic boom times — are not expected to return until the third quarter of 2004.
And air travel doesn’t seem to be bouncing back either. Los Angeles International Airport has been reporting double-digit declines in passengers for the past three months, according to the Los Angeles Convention and Visitors Bureau.
Recent reports show that most Californians, and Americans in general, are sticking to road trips, which tend to be shorter in distance and duration. Many Santa Monica hotels have adjusted their marketing strategy to reflect that change, officials said.
“We had to adjust marketing and advertising from a national to a more regional level,” said Brian Jago, director of sales and marketing for both Shutters on the Beach, located at 1 Pico Boulevard on the beach boardwalk, and Casa del Mar, located at 1910 Ocean Front Walk. “We did a lot more on a local and regional basis than we would have otherwise.”
But Jago also noted the hotels he works for are off more than 15 percentage points in occupancy levels compared to last year. And this week is going to be even worse.
“This is one of the slowest weeks of the month,” he said. “Let me just put it that way.”
Except for a September promotion, neither hotel has discounted its rates. The rooms average between $380-$580 a night, Jago said.
“Bottom line, people are going to travel for business or leisure and adjusting your rates isn’t going spur travel,” he said. “Our corporate travelers remain the same.”
Kerns said Santa Monica is not likely going to see a return to 2000 room rates and occupancy levels until international travel picks up again. The convention and visitors bureau has undertaken an extensive $800,000 advertising and marketing campaign overseas to boost the number of foreign visitors to Santa Monica.
“When international people start to travel again on a regular basis, that’s when you’ll see those dollars we are losing start to creep up,” Kerns said.
However, many international tourists will likely stay home or travel to another country if America goes to war with Iraq, officials said. It’s customary for Japanese not to travel in countries that are at war, the Associated Press has reported.
“As long as we are beating the drums to go to war, that is not going to help regain international travelers’ confidence,” said Hortobagyi, whose Georgian Hotel has occupancy levels 25 percent lower than last year. “They might as well go to Tahiti, Australia or New Zealand, which are all a little more independent from all these political activities.”
Originally published in the Santa Monica Daily Press print edition on September 10, 2002. Read the original PDF.