Orange County Register
07/10/16

Historic Hotels in O.C. Coast Cities Are Thriving by Offering Cozy, Personalized Experiences
By Hannah Madans

http://www.ocregister.com/articles/beach-722021-hotel-hotels.html

Perched above the sand in Laguna Beach is the Laguna Riviera Beach Resort, a blink-and-you-miss-it hotel known for its whimsical murals and history of celebrity clients.

The family-owned hotel opened in 1948. Guests in its heyday included Richard Nixon, author Pearl S. Buck, and Bill Hanna and Joe Barbera, creators of “The Flintstones.”

The Riviera is the last of its kind in the area, still owned by its builder’s family, says owner Kort Pearson.

The 41-room hotel, which was built by Pearson’s grandfather Harry Willats, has seen additions and improvements over the years, but Pearson says the property has “stayed true to its roots.”

Kitchens, installed in 1948 just in case the hotel converted to apartments, remain in many of the rooms.

Longtime customers include Phoenix resident Bruce Levitta and his family. They’ve been regulars for more than 50 years.

“We go for the tradition,” Levitta says. “I would almost feel guilty staying somewhere else.”

Nearly 70 years ago, the Riviera’s room rate was around $10. That’s $99 today when adjusted for inflation. Guests now pay between $149 in low season to an average $289 nightly during the summer, a bargain compared with nearby resorts that fetch $795 per night.

But not unlike their haute neighbors, many of the small, independent hotels that dot Pacific Coast Highway and Coast Highway in Orange County are making improvements to bring their classic style into the modern era, along with some price updates.

NEW OWNERS, NEW LOOKS
In 2015, around $1.75 billion was spent on hotel purchases in Orange County, according to Atlas Hospitality Group, an Irvine-based real estate company that specializes in hotels.

In total, 27 hotels traded hands in Orange County.

A number of luxury hotels underwent major changes. The St. Regis Monarch Beach in Dana Point debuted June 1 as Monarch Beach Resort after a $40 million renovation. The makeover includes changes to the lobby, pool area and spa and the addition of new restaurants.

Starting in June, the resort was run by its owner, Denver-based KSL Capital Partners LLC. The group bought the resort in May 2014 for $316.9 million.

Like the Monarch Beach Resort, many of the coastline’s smaller beach hotels have recently changed hands and made significant renovations aimed at increasing profits.

Take, for example, the Laguna Beach Lodge. The modest, 43-room hotel sits across the street from the luxurious Montage Laguna Beach.

The Lodge has a pool and ocean views, and its tired interior will soon get an upgrade.

Richard Ham bought the property in 2015 and will invest up to $2 million to renovate the bedrooms and refresh the outdoor spaces.

Despite the hotel’s small size, business is good, he says.

“In Laguna Beach, beach properties are practically recession-proof,” Ham says. “Smaller hotels cater to different clientele than five-star, luxury-branded hotels.”

The hotel’s proximity to the Montage has its benefits, such as attracting wedding guests who don’t want to bust the bank on luxury rooms across the street. The resort’s nightly rate for an “ocean horizon room” the first weekend of June was $795. At the Lodge, in-season rates run $149 to $350. Off-season suites are roughly $125 a night.

Despite the hotel’s dated style, occupancy is routinely 80 percent or higher over the summer, when families descend on the beach town. And with rising tourism numbers, hotels can count on a return on their investments.

Ham predicts revenue per available room will increase 10 percent to 25 percent once the upgrades are complete, which means a higher room rate for visitors.

The 30-room Ocean Front Inn & Suites in Sunset Beach recently underwent a renovation. Two years ago, Deven Solanki bought the property, which was built as an antique shop in 1988.

“It’s a family-friendly boutique hotel that’s family-owned,” says manager Deb Scribner.

After buying the hotel, Solanki renovated all the rooms.

During the summer, the hotel is full. In the off-season, rooms run $90 to $130 a night; summer rates are $129 to $200.

“We don’t want to make it so expensive that people can’t afford to come with their families. We really keep it family-friendly and affordable for them,” Solanki says.

Ham, owner of the Laguna Beach Lodge, also renovated La Casa del Camino, a 36-room hotel a few minutes drive from the Lodge. He bought the property in 2002.

The Mediterranean-style hotel, with access to a little-known beach, was built in 1927 and updated in 2012. It caters to couples willing to spend $300 for a romantic night in an in-season room.

“You can never build a hotel like this again. There’s no way. It’s too much money,” Ham says.

NO NEW COMPETITION
Ham’s on the money, according to Alan Reay, president of Atlas Hospitality.

“The smaller hotels will not have any new competition,” Reay says. “There isn’t any land available, and no one can afford to build an independent hotel in that area anymore. You can only build a luxury product, which you need a lot of land for.

“In these smaller, independent hotels, it’s as close as you can get to a monopoly,” he added. “No one is going to build any more product at that price point. They can’t afford to.”

While the number of small, independently owned hotels and motels along Orange County’s shoreline has shrunk over the years, bargain-seeking beachgoers can thank the California Coastal Commission for helping to preserve modest-priced lodging by the sand.

The commission’s Coastal Act, which was passed in 1976, includes a measure that “protects and preserves lower-cost accommodations,” according to the commission’s district manager, Madeline Cavalieri.

Beach hotels do not need to be as concerned about recessions and new building as a result, Reay says.

Ham and Pearson, of the Laguna Riviera, have received some pressure from chains and hospitality groups looking to break into the desirable beach market.

“There’s always, always going to be a market for these hotels. It’s highly desirable from an investor and a lender standpoint,” Reay says. “They know you can’t build a lot of new hotels in that market.”

LOWER PRICE, HIGHER ASPIRATIONS

Small doesn’t necessarily mean cheap when it comes to beach lodging.

While the Montage, the Ritz-Carlton Laguna Niguel, Monarch Beach Resort and Surf & Sand Resort in Laguna Beach cater to luxury travelers, boutique hotels also are capitalizing on the market, Reay says.

“You have a high percentage of rooms catering to the upper-end traveler. The other, smaller properties are renovating and looking to improve their rates, but there always has been and always will be a market for that smaller, independent hotel at a lower price point,” Reay says.

Reay added that while these hotels are priced lower than resorts, the rates are often still steep.

At the Laguna Beach House, built in the 1980s, a slow-season room rate is as low as $199 a night. That same room will pick up to $519 in summer.

Casa Laguna Hotel & Spa, a 23-room boutique hotel, runs $210 to $425 a night.

Guest Christina Lacombe, of Miami, says she appreciated the hotel’s “décor, the hospitality, the cleanliness and its coziness.”
She says she plans to stay at the hotel again.

“There is a growing segment of the guest base in Orange County seeking a unique, boutique lodging experience not found at larger resorts,” co-founder of PRG Investment & Management Britten Shuford says.

Casa Laguna and Laguna Beach House have both recently undergone renovations to enhance their offerings.

The Laguna Beach House completed a $1.5 million renovation in April 2015. The lobby was made more inviting, a conference room was added to attract more business guests, the pool deck was expanded and surf design was added to rooms to imbue an upscale coastal feel, according to General Manager Rachel Tejeda.

The property was bought by its current owners, Classic Hotels and Resorts, in 2014. The group also owns the Inn at Laguna Beach, a larger hotel with 70 rooms next door to the Laguna Beach House.

Shuford’s goal when he purchased Casa Laguna in 2014 was to keep the property’s history and charm “while making relevant changes.”

Changes included new tile on the walls, vanities, showers, curtains and more. Additional work will still be done on the hotel’s pool and spa.

“It’s getting more competitive. A lot of hotels have undergone some form of renovation driven in part by the hospitality sector having done so well over the past few years with very little new supply,” Shuford says.