By Ed Moosbrugger

Nov. 7 -- As downtown businesses head into the holiday season, they face more uncertainty than many can remember because of fears created by the Sept. 11 terrorist attacks on the East Coast and the anthrax scare.

Santa Monica has a tougher challenge than many cities because downtown businesses draw heavily on tourists and there has been a sharp decline in travel since Sept. 11.

“Everybody is in a ‘let’s wait and see’ mode,” said Paul Hortobagyi, general manager of The Georgian Hotel on Ocean Avenue. He estimated that hotel occupancy in Santa Monica has plunged by 35 to 40 percent in the wake of the terrorists attacks and, as of mid October, he hadn’t noticed any rebound.

Santa Monica’s visitor industry relies heavily on international and corporate travelers, and both those markets have been severely curtailed because of travel fears.

The drop in visitors continues to show up in declining sales at some downtown businesses.

“There definitely is an impact,” said Jay Demircift, president of Puzzle Zoo on the Third Street Promenade, which normally gets about 40 percent of its business from tourists.

Business already was off by 10 to 15 percent because of a softening economy and disruptions from street work, Demircift said. Terrorist induced fears cut business by another 10 to 15 percent, he reported.

On a more positive note, Demircift said, “I am definitely seeing an improvement” and “I’m pretty optimistic about the holiday season.” He is doing a little more advertising and hasn’t cut back severely on buying.

At Ye Olde King’s Head pub, a restaurant and gift shop on Santa Monica Boulevard, business is off by 18 to 20 percent since Sept. 11, but the pattern is mixed among different parts of the business, reported proprietor Ruth Elwell. At the gift shop, customers are buying more comfort food but less gifts. And the pub is holding its own.

“We’re still getting the British tourist, but not as many as before,” Elwell said who sits on the Bayside District Board. The United Kingdom is the biggest international market for Santa Monica.

Not all downtown businesses have been hurt by fears in the wake of the terrorist attacks.

“I am totally amazed but business is still very strong,” said Mike Nichols, general manager of Carlson’s appliance store on Fifth Street. There has been no drop in either sales or profit margins, he said.

Nichols admits to having “a little bit of a mental obstacle on buying” immediately following the terrorists attacks. “I played the fence a little bit for two weeks but am now ordering like I normally did,” said Nichols, who also has boosted advertising by about $8,000 a month.

The increase in sales at the appliance store may reflect a trend appearing in some national surveys that people are focusing more on their homes now.
Businesses can take a cue from that.

“Just try to make your place as homey and comfortable as possible,” Elwell said.

Indeed, some businesses report that some customers have come in just to be with familiar people.

“I think customers have gotten a little friendlier,” Nichols said. “I had at least a dozen people, beginning four or five days after the 11th, stop in for the sole purpose of saying hello. It surprised me.”

Unfortunately, not nearly as many visitors from afar are coming to Santa Monica, which has caused severe adjustments at local hospitality businesses.

The Georgian Hotel has gone pretty much to a four-day workweek for its employees to avoid layoffs, Hortobagyi said. And for the first time, he is personally making sales calls to drum up business.

Santa Monica’s hotel occupancy rate was already off 9.3 percent this year through August before the terrorists struck. Now Santa Monica has an even tougher hill to climb, partly because it is so dependent on foreign tourists, who accounted for 62 percent of visitors to Santa Monica from outside Los Angeles County last year.

The Department of Commerce estimates that the number of foreign travelers to the United States will drop at least 25 percent this year and won’t regain 2000 levels until after 2005, noted Misti Kerns, executive director of the Santa Monica Convention & Visitors Bureau.

Kerns expects hotel occupancy of between 65 and 70 percent in 2002, with room rates down by about 10 percent from 2000 if, as expected, local hotels reduce rates to maintain occupancy. Santa Monica’s room tax revenue could drop 15 percent next year, she said.

Meanwhile, Kerns will concentrate more on regional markets where people can come by car. Primary targets will be Bakersfield, Fresno, Santa Barbara, San Diego, Las Vegas and Phoenix. Secondary targets will include the San Francisco Bay Area, Sacramento and Monterey. And the bureau will join efforts to get Santa Monicans to spend locally.

Ed Moosbrugger's column "Bayside Business" appears monthly.