Hotel surge reflects renaissance in downtown Los Angeles


LOS ANGELES — If the notion of adding four hotels on a single downtown Los Angeles block within a four-year period gave Bill Marriott pause, having to cut a check to competing businesses cleared that up real quick.

The Marriott International chairman last March was speaking to a tent full of executives and journalists at the site of what will be a dual-branded Courtyard by Marriott/Residence Inn that's set to open next year. Marriott noted that the 1,001 rooms in the JW Marriott and Ritz-Carlton hotels across the street at the L.A. Live entertainment and retail complex weren't sufficient to handle the influx of dignitaries who had gathered for the event.

"We had to farm out a bunch of rooms to the competition," he said. Company executives "didn't enjoy that."

The consensus: "We're going to need more hotels."

Downtown LA Hotels MapIn the year since, at least a handful of other hoteliers have gotten the same idea. In a region noted for glamorous westside hotels like the Beverly Hills Hotel, icons like the Hollywood Roosevelt and Century Plaza and beachside abodes such as Loews Santa Monica Beach Hotel and Casa del Mar, investment dollars are rapidly moving east of the Harbor Freeway.

If all goes as planned, at least 10 downtown Los Angeles hotels totaling almost 5,000 rooms will have been either built or extensively renovated between 2010 and 2017. Downtown's hotel-room inventory, which stands at about 5,000 rooms, is slated to jump about 30% within the next four years. (Click here or on the image, right, for a larger view of a map of the hotels in LAs Downtown area.) 

The most prominent of the bunch, literally and figuratively, is the site of the old Wilshire Grand hotel, which opened in 1952 and closed two years ago. Korean Air, which bought the Wilshire Grand in 1989, is planning a $1 billion, mixed-use project that will include a 900-room luxury hotel in what will be the city's tallest building. The 73-story, glass-sheathed building will have a 70th-floor hotel lobby and will include a spire that tops out at 1,100 feet when the property opens in 2017.

"Downtown's going through this real renaissance in terms of its popularity," said Sean Rossall, spokesman for the Wilshire Grand project, who added that no decisions have been made as far as who would manage the hotel. "We feel that we're coming into a market that doesn't have the type of offerings that the Wilshire Grand is going to have."

Meanwhile, the Courtyard/Residence Inn across the street from L.A. Live will have 392 rooms when it goes online in 2014.

Additionally, the area's hipster residents will be served when the 180-room Ace Hotel, which is being housed in a 1927-built building that originally housed a United Artists theater, opens at the end of this year.

There's been a bit of horse trading, as well. In May, Hyatt Regency will return to downtown, after an eight-year absence, in the 491-room hotel that was originally built as the Sheraton Grand in 1983 and was a Marriott from 1998 until last August (the hotel's temporary moniker is the L.A. Hotel Downtown). The owner, China-based Shenzhen New World Group, acquired the property out of foreclosure in 2010 and is sinking $20 million into its renovation.

"Los Angeles' center city is composed of many legal, financing and third-party consulting companies that need to be downtown," said Libby Zarrahy, director of sales and marketing at the soon-to-be Hyatt Regency. "And the Walt Disney Concert Hall, Dorothy Chandler Pavilion, Mark Taper Forum, all of those are within walking distance."

Developers and hoteliers are responding to a surge in downtown visitors brought on by the combination of rising regional tourism demand and an expanding number of attractions to the area.

The Los Angeles region attracted a record 41.4 million visitors last year, up 2.5% from 2011, according to the Los Angeles Tourism & Convention Board.

As a result, the Los Angeles-Long Beach hotel market experienced an 11% jump in revenue per available room (RevPAR), outpacing the 6.8% overall U.S. RevPAR growth and trailing just five U.S. markets in that department, according to Smith Travel Research.

In fact, during the past three years, Los Angeles-area hotel RevPAR is up 34%, while average room rates have risen about 14%.Yet despite these steady increases, Los Angeles-area hotel-room supply actually shrunk 1% last year, the second-largest percentage drop in the U.S. to Norfolk-Virginia Beach.

Downtown's been reinvigorated, as well. Until about a decade ago, the area was thought to be pretty quiet after its office buildings emptied out. Some of that reputation changed when the Staples Center opened in 1999, and since then, dozens of the area's century-old commercial buildings have been converted to residential units for younger people looking for a more urban living experience.

That, combined with the opening of L.A. Live and Disney Hall as well as a burgeoning restaurant and club scene, has attracted visitors and locals alike. Downtown's residential population jumped almost 60% between 2006 and 2011, to more than 45,000 people, according to the Downtown Center Business Improvement District.

"Downtown has really hit its stride as a market, especially with the success of L.A. Live and what's going on around there," said Bruce Baltin, Los Angeles-based senior vice president at PKF Consulting. "And the convention center is underserved."

Some would say the onrush in development and renovation activity would have started sooner had it not been for the recession, which caused business and leisure customers to scale back travel and financing to dry up.

For instance, city leaders envisioned a big downtown visitor push once the Staples Center opened its doors more than 13 years ago, but L.A. Live's first phase didn't open until eight years later, and the JW Marriott/Ritz-Carlton building didn't come online until almost three years after that.

Korean Air first proposed its Wilshire Grand redevelopment, albeit at a slightly smaller 700 rooms, almost four years ago, but it didn't close the old hotel until 2011 and remained relatively quiet about its plans until last month.

Despite the impeding jump in downtown room inventory, neither Baltin, Rossall nor Zarrahy feared a scenario where a glut of new and renovated rooms would cause oversupply and room-rate declines.

In fact, while Bill Marriott last year decried the need to patronize non-Marriott hotels to temporarily house his employees in the area, Zarrahy at the incoming Hyatt Regency not only welcomed the competition but boasted about it.

"The JW-Ritz Carlton just celebrated its third birthday," Zarrahy said. "They have brought a new sense of energy with L.A. Live, so as a whole, the community itself becomes more attractive to all types of segments."

Follow Danny King on Twitter @dktravelweekly. 


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