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Sunny Forecast for Tourism

By Ed Moosbrugger

January 17 -- Santa Monica can expect moderate growth in tourism revenues in 2007 as visitors face increased difficulty finding a room at the inn because of high hotel occupancy rates.

The city is coming off a strong year in 2006, when the hotel occupancy rate rose to an estimated 81 percent from 77.9 percent in 2005, and the average room rate jumped 8.5 percent, according to PKF Consulting.

For the first 10 months of 2006, the latest period, for which figures are available, Santa Monica’s hotel occupancy rate rose 3.8 percent to 84 percent and its average room rate increased 8.5 percent to $253.52.

“2007 should continue to offer Santa Monica a strong year,” said Misti Kerns, president/CEO of the Santa Monica Convention & Visitors Bureau. She expects a slight growth of about half a point in hotel occupancy and about a 7 percent rise in room rates.

“Historically, we have performed well in the hotel sector even through economic downturns,” Kerns said. “Local businesses based in Santa Monica include a commercial aspect that has not been as deeply effected by downturns in the past.”

Those include entertainment, financial and creative arts clientele, Kerns said.
For 2007, PKF forecasts flat occupancy at 81 percent and a further increase of 7 percent in average room rate to $266.93.

PKF said the market is reaching “stabilized occupancy levels” and more of the focus will be on increasing room rates.

Individual hotels reflect that outlook.

At the Best Western Ocean View Hotel on Ocean Avenue occupancy remained high (about 90 percent) and room rates rose 5 to 10 percent in 2006, said General Manager Robert Farzam. For 2007, he expects stable occupancy and a 5 to 10 percent rise in average room rate.

“It’s been a good year” at the Fairmont Miramar Hotel at Wilshire Boulevard and Ocean Avenue, with occupancy expected to end up at about 80 percent for 2006, compared to about 77 percent in 2005, said General Manager Desmond Acheson.

Room rates also rose. “Next year (2007) we’re expecting to see a bit more of the same,” he said.

Acheson cited several factors as contributing to a buoyant visitor industry. “California is an attractive market,” he said.

Add to that the declining value of the U.S. dollar, which makes it cheaper for foreign visitors. Acheson has noticed more visitors from the United Kingdom and Canada.

The number of foreign visitors to the U.S. is expected to increase 5.3 percent in 2007, according to the Travel Industry Association of America, while domestic vacation travel will rise 1.3 percent.

Total travel expenditures in the United States are predicted to rise 5.3 percent in 2007 vs. 7.5 percent in 2006, according to TIA, with spending by international visitors growing 6.6 percent and outlays by U.S. resident rising 5.1 percent in 2007.

Those trends are favorable because Santa Monica gets an unusually large number of foreign visitors.

PKF gives several reasons for the strength and stability of the Santa Monica lodging market. They include a stable commercial base combined with high-end group and leisure business. Santa Monica also benefits from its prime location.

“Many of the hotels in this market are located within walking distance of the Pacific Ocean, one of the most important demand generators in Southern California,” PKF said in its forecast report released in October.

The outlook in Santa Monica reflects what’s happening in Los Angeles County, although Santa Monica has higher occupancy levels and room rates than most submarkets in the region.

PKF expects hotel occupancy rates to be stable at about 76.5 percent for Los Angeles County in 2007 and the average room rate to rise 4.8 percent.

“Many of the region’s submarkets are at or above realistic capacity occupancy levels,” the firm said.

That explains why some hotels want to add rooms.

Hotel Shangri-La on Ocean Avenue closed December 1 for a major renovation that will include expanding the hotel from 54 to 71 rooms by dividing up some larger suites into two standard size rooms.

The hotel hopes to reopen in time for the annual American Film Market in late October and early November, said General Manager Dino Nanni.

Meanwhile, the family that owns the Best Western Ocean View Hotel continues to pursue its plans to replace the Pacific Sands and Travelodge motels on Ocean Avenue with a larger, moderately priced motel.

At the Fairmont Miramar new owners are evaluating what to do. The hotel was acquired in September by MSD Capital, a financial arm of the Dell computer family. The property is still managed by the Fairmont organization.

Acheson said a renovation is possible in the next 18 to 36 months, but he hasn’t heard anything about expansion plans for some time.

AMERICAN FILM MARKET attendance at the annual trade show in Santa Monica rose 2 percent to a record 8,208 people in 2006. AFM draws film industry people from around the world for its annual eight-day run, which brings many visitors to Downtown Santa Monica.

Among countries showing big percentage increases in film buyers were Mexico, Italy, Turkey and Japan. The 2007 AFM will be held between October 31 and November 7.

 

 

 

“Historically, we have performed well in the hotel sector even through economic downturns.” Misti Kerns

 

“The economy is stable. People are having lots of meetings.” Desmond Acheson

 

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