Hotel Industry’s Lost Momentum

https://www.ocbj.com/news/2020/oct/19/hotel-industrys-lost-momentum/

 Views from recently-opened JW Marriott Anaheim Resort: 466 rooms, nearly $300M price tag

SIX OPEN IN 2020; FUTURE PLANS IN DOUBT

By Katie Murar
Monday, October 19, 2020

2020 has been the hardest time for local hotels in recent history, due to the impact of the pandemic on travel, according to longtime industry observers.

“California hotels were on a very steep curve in 2018 and 2019 across the board, with increases in under construction, planned and opened properties,” Atlas Hospitality Group founder Alan Reay previously told the Business Journal. “That momentum is lost.”

In the previous market crash in 2009, hotel room revenues in Orange County’s tourism-driver, Anaheim, fell 17% from year-ago levels.

In the first eight months of 2020, that figure is down nearly 56% year-over-year, a figure topping the 54% drop experienced in Los Angeles, according to travel research firm STR.

Occupancy continues to suffer, with levels around 46% for the first seven months of the year, down from typical averages around 75%, according to STR. Average daily rates for OC hotels stood at about $132 at the end of August, down 19% from a year ago.

This year’s ranking of the top hotels in Orange County by room count doesn’t take into account temporary closures.

Several local properties on the list remain closed as a result of the pandemic. This includes two notable Irvine Company properties: the 536-room Hotel Irvine and the 295-room Fashion Island Hotel.

The Newport Beach-based company’s Resort at Pelican Hill has remained open throughout the pandemic.

Other hotels are operating at reduced occupancy levels.

JW Marriott

The pandemic didn’t stop one notable hotel from opening in tourism-dependent Anaheim this year, which is still suffering from the loss of economy driver Disneyland Resort, shuttered since March with still no reopening date finalized.

The JW Marriott Anaheim Resort added 466 hotel rooms to the city, and also represented the first four-diamond property to open on non-Disney grounds in the city.

The hotel, which cost more than $300 million to develop, opened in August. When its collection of restaurants, bars, meeting rooms and other amenities are fully operating, it will employ north of 200 people; right now that figure is closer to 100 people.

“It’s a challenging time in Anaheim to say the least,” said Ajesh Patel, a longtime hotel owner and developer in the area. He is president and chief executive of Orange-based Prospera Hotels, which developed the JW Marriott along with Anaheim-based O’Connell Hotel Group.

Five other hotels opened in Orange County this year, including the 168-room Staybridge Suites Irvine and the 125-room Inn at the Mission San Juan Capistrano.

Still under construction with a projected December opening date is the 618-room Westin Anaheim Resort. It will be the largest hotel to open in Orange County in several years, and is still the largest property under construction in the state, according to Atlas Hospitality.

Planning

Along with the JW Marriott, O’Connell Hotel Group and Prospera’s plans for development next to the GardenWalk shopping center also included a proposal for a second hotel, this one to run at least 350 rooms on Disney Way.

“Now, we don’t know if that will ever be built,” Bill O’Connell told the Business Journal a few months ago.

At the end of 2019, there were 69 hotels with 11,048 rooms in planning in the county, up 7% from 2018, according to Irvine-based hotel consultancy and brokerage Atlas.

That’s expected to decline this year.

While hotels that have started construction are likely to complete on time, or at least close to their original schedule, those that have not yet started construction or received proper financing are likely to be stalled or canceled altogether.

“We are forecasting that the vast majority of hotel projects in planning will simply not get built,” said Reay in a recent development report. “Developers are already looking at other uses, namely residential.”

One potential bright spot – previous concerns over a surplus of new hotel inventory have been eased in the wake of the pandemic.

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