By Ed Moosbrugger

January 29, 2010 -- Santa Monica's visitor industry faces a slow recovery in 2010 from a very difficult year that saw hotel revenues fell about 20 percent because of lower occupancy and room rates.

The visitor industry, which is vital to Downtown, has been hit by a combination of a weak economy and intense competition from other areas.

“The whole industry has had a very tough time,” said Ellis O'Connor, owner's representative and former general manager for the Fairmont Miramar Hotel at Wilshire Boulevard and Ocean Avenue.

PKF Consulting forecasts a slight 1.5 percent increase in occupied hotel rooms for Santa Monica in 2010, with no increase in room rates. It forecasts an occupancy rate of 76.8 percent, compared to an estimated 75.7 percent in 2009.

That follows an estimated drop of 4.8 percent in occupied rooms and a 15 percent decline in room rates in 2009. The occupancy rate fell from 81.5 percent in 2008, partially because of an increase in supply with the reopening of the Hotel Shangri-La.

With the small rebound expected in 2010, the number of rooms occupied by visitors to Santa Monica will be back up to the level of 2005, but below 2006, 2007 and 2008, according to the PKF forecast.

“Santa Monica is expected to perform better than our counterparts in Los Angeles but it is not going to be an easy climb back,” said Misti Kerns, president/CEO of the Santa Monica Convention & Visitors Bureau (SMCVB). “It will most likely take months for us to see a strong rebound.”

Still, she said, “there are glimmers of hope,” including a slow pickup in business travel.

“Leisure travel is what is keeping us alive these days,” Kerns said. “Small group and incentive business will slowly rebuild over time.”

On the national scene, the U.S. Travel Association is projecting a modest increase in travel for 2010, with leisure travel up 2 percent, business travel up 2.5 percent and inbound international travel up 3 percent.

One positive sign in Santa Monica is the lessening in occupancy declines as the year progressed in 2009. The occupancy rate was down 11 percent in the first half of 2009 but that was trimmed to 7.7 percent within the first nine months, according to PKF. In September, the occupancy rate was down only 1.7 percent from a year earlier.

Through the first nine months of 2009, Santa Monica had the highest occupancy rate (77.5 percent) of any submarket in Los Angeles County tracked by PKF.

“The relatively strong occupancy allows us to be cautiously optimistic,” Kerns said.

The first six months of 2009 were very difficult, but occupancy at the Fairmont Miramar Hotel rocketed to 90 percent in July and more than 90 percent in August, said O'Connor.

“Summer at the beach was alive and well,” said O'Connor, who was recently named owner's representative for four hotels of MSD Hospitality, including the Fairmont Miramar and three hotels in Hawaii. “The worst fears were not realized.”

The hotel has benefited from its new FIG Restaurant and improved spa services, he said.

O'Connor, who was succeeded by Wolfgang Jonas as former director of operations at the Fairmont Miramar, expects improvement in 2010, saying the first half of the year should not be as bad as 2009. He expects positive momentum to begin building in the second half for what is expected to be substantial improvement in 2011.

At the Ocean View Hotel on Ocean Avenue, General Manager Robert Farzam will continue aggressive promotions and special rates to keep occupancy up.

He estimated in December that room revenues were down about 30 percent for the year, although occupancy in still running high. The hotel has opted to keep occupancy high at the expense of sharply reduced room rates.

Farzam said it is difficult to gauge the outlook for 2010, but he thinks “summer 2010 should be when rates and occupancy go up a lot.”

The Farzam family is moving forward with plans to build a new hotel on the sites of the existing Pacific Sands and Santa Monica Beach Travelodge motels on Ocean Avenue.

They hope to break ground this month and open in summer 2011, Farzam said.

“We're going ahead because we already have financing in place,” he said.

Santa Monica will continue to face fierce competition for visitors.

“More than ever we compete with the entire Western seaboard,” O'Connor said.
The SMCVB continues to nurture important international markets, including the United Kingdom, Australia and New Zealand. It also is exploring the emerging markets of Brazil and India.

To better serve visitors, about 1,600 people have been certified under the l AM Santa Monica Ambassador Program to provide information to guests, Kerns reported.

“The more you know and can share with a customer, the more time someone may spend here,” she said.