Economics, Expansion Drive Hotel Renovations

Economics, Expansion Drive Hotel Renovations

Orange County Business Journal

Economics, Expansion Drive Hotel Renovations
By Paul Hughes


Sometimes, it’s just time. Hotels and resorts refresh their looks about every seven to 10 years as styles change in “linens and lotions” and as food and beverage and design trends emerge, even in the kinds of cocktails crafted for travelers.

And sometimes there’s ample cash for updos.

Like there is today. The local hotel business is going gangbusters, with boosts in average daily rates, occupancy and revenue per available room—despite recent talk of a peak in the U.S. hospitality industry.

The result: more hotel upgrades.

CBRE Hotels shows 3% to 9% hikes most months this year in all three categories, and trend lines are heading up.

Average daily rates here are about $200 a night, RevPAR about $155, and occupancy a hair above 80%, if not a holy grail, at least a sweet spot for filling rooms—essentially “full employment” of inventory.

“Once they hit the low-80% range, they push up the average rate,” said Alan Reay, president of Irvine consultant and broker Atlas Hospitality Group Inc.

Economic data presented at the Orange County Visitors Association’s annual tourism conference this month at Waterfront Beach Resort, A Hilton Hotel confirmed an overall healthy local hotel market in the context of a growing U.S. economy.

The Irvine-based association’s report, written by Tourism Economics LLC in Wayne, Pa., showed steady hotel construction and growth in corporate capital expenditures, including for travel, and in the number of middle- and upperclass families in the U.S. and key tourism feeder markets, such as China.

“Revenue and profits are so strong, they’re investing back into the hotel to maintain quality and profitability,” Reay said.

Hotels in Anaheim, including near Disneyland Resort, are part of the development surge, including, at the premium level, one Disney will build and two by Wincome Group affiliates.

Recent midscale upgrades include a $14 million renovation by Grand Legacy at the Park and a $4 million flag change from Ramada to Wyndham Garden overseen by Anaheim-based Parkwest General Contractors.

Legacy properties are also getting into the act: 53-year-old Howard Johnson Anaheim Hotel & Water Playground is a third of the way through renovating its 296 rooms, with $6 million of $12 million invested so far.

Work will be done before Star Wars: Galaxy’s Edge opens at Disneyland, a spokesperson said.

Pearl Diving

On an even deeper dive, a hotel sometimes has to keep being as good or better than the neighbors, especially when all the best families in town are trying to fill rooms at $500 a pop and up.

Local executives say that at one time there were efforts to promote OC’s coastal offerings as a unified package, an idea that didn’t pan out.

“It’s not exclusive to coastal properties,” Reay said of hotels upping their games, “but in the luxury segment [owners] get the biggest return on that investment.”

Rate increases from a refresh or added rooms at coastal resorts can start at twice that of hotels in the wider market—“$50 to $100 a night,” Reay said, “where a more rate-sensitive midscale property (renovation) can get another $25.” CBRE data broken out for coastal areas show ADRs and RevPAR at 25% to 40% more than OC’s overall average.

Just Coasting

Recent waterfront projects include a 15th-anniversary redo of public areas at Montage Laguna Beach, right down to the bathrooms and a new chandelier. A new lobby lounge is the centerpiece and includes California plein air artwork, new floors, a grand staircase, fixtures and rugs.

Montage joins Monarch Beach Resort and Hotel Irvine in trying to attract locals. It’s added a social hour five nights a week with “craft cocktails [and] new quaffs,” including a cucumber-grapefruit-gin combo and something called Purple Rain that calls on lemon vodka and grape juice.

It recently sold two resale properties at its residences for $18 million and $6.6 million, a spokesperson said.

The tallest news along the coast is the opening of the Waterfront Hilton’s second tower, which it showcased as host of the tourism conference. It now has 437 rooms, up from 290, including 156 suites, up from 25, and its staff has grown 60% to 475.

General Manager Paulette Fischer said Waterfront now offers a third of the rooms in the Surf City Collection—Hilton, Hyatt Regency Resort and Spa, Paséa Resort & Spa and Shorebreak Hotel.

Boss Cats

Recent local industry changes also include leadership:

• This month Montage named Anne-Marie Houston general manager; she’s worked in hotels on four continents.

• Destination marketer Visit Dana Point named Jonny Westom executive director in January; he’s focused his career on resort destinations, including Palm Springs and Sonoma Valley.

• Resort at Pelican Hill has revamped across its operation since naming Tom Donovan managing director last spring. The Irvine Co.-owned property also named:

• Hayato Nogaki director of food and beverage in January.

• Robert Ford golf club general manager in October.

• Robert Marusi director of sales and marketing in September.

• On the management side, Balboa Bay Resort owners Eagle Four Partners, which previously co-operated the property with Pacific Hospitality Group, took on full management duties on April 1.

The companies remain co-investors in and work together on other projects, including Paséa.

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