WEST HOLLYWOOD, Calif. — With a hotel-room pipeline slated to boost this city's lodging inventory by more than a third, City Manager Paul Arevalo explained the paradox of room demand in West Hollywood, which borders both Los Angeles and Beverly Hills.
"We have roughly 750 rooms that are at some stage of construction," Arevalo told attendees at Visit West Hollywood's first tourism summit at the London West Hollywood last month. "People who come here don't come here to sleep."
They come to party, which turns out to be a good spur to development.
Indeed, while the hotel stock of most U.S. metropolitan areas continues to increase steadily at between 1% and 2% a year, West Hollywood is expected to boost its inventory by about 20% next year when construction is completed on its first two newbuild hotels since the London opened as the Bel Age in 1984.
Most prominently, Denihan Hospitality's James luxury brand will make its West Coast debut next year with a 286-room hotel perched on the hillside corner of Sunset and La Cienega boulevards. And Kimpton Hotels will add a 105-room boutique property called La Peer two blocks east of where West Hollywood borders Beverly Hills.
At fewer than 2 square miles, West Hollywood, popularly know as WeHo, is the smallest of a triumvirate of cities that border Los Angeles — Santa Monica and Beverly Hills being the others — where the combination of affluence and tourism draws has ensured high occupancy rates that in turn have pushed room rates far above the region's average.
Hotels in West Hollywood will finish the year at about 83% occupancy, about two percentage points above the regional average. More notably, room rates are averaging about $280 a night, almost double the norm for the Los Angeles-Long Beach region, according to STR.
"[WeHo] gets a lot of demand from the creative industries, such as entertainment, design and advertising," said Bruce Baltin, the Los Angeles-based senior vice president at PKF Consulting. "They like to stay closer to where they play than where they work, so it's a pretty good magnet."
This mixed-use project on Santa Monica Blvd., under city review, would include 81 hotel rooms. Photo Credit: Danny King
Much of that demand has been along the Sunset Strip, which includes the 239-room Andaz West Hollywood, the 237-room Mondrian Los Angeles and, to a lesser extent, the 226-room London West Hollywood (technically two doors off the Sunset Strip).
WeHo has long been a draw for progressive locals and tourists alike. Known largely for its music scene along the Strip from the 1960s to the early '80s, when it was still part of the City of Los Angeles, West Hollywood was emerging as one of the country's most pro-LGBT communities when it was incorporated as an independent city within Los Angeles County in 1984.
And while those roots have strengthened — the L.A. Pride festival and AIDS Walk Los Angeles both take place in WeHo — the city has broadened its politically progressive stance, declaring itself the country's first "official" pro-choice city in 1993 and banning the sale of handguns as well as clothing items that contain real animal fur within the city limits.
As Arevalo noted, the reputation for an active nightlife scene hasn't abated, as the city continues to draw revelers (WeHo's annual Carnival draws an estimated half-million people each Halloween) as well as the morbidly curious, who make the trek to see where John Belushi and River Phoenix died (the Chateau Marmont and Viper Room, respectively).
Such tourism demand has spurred hotel construction that will extend beyond the Sunset Strip and beyond 2016.
The Strip itself will add a 148-room property under the Marriott International/Ian Schrager lifestyle brand, Edition, in 2018, while the site of the shuttered House of Blues has been approved for a mixed-use project that could include 149 hotel rooms.
About a mile west, another Sunset Strip site has been titled for about 200 hotel rooms.
Beyond that, a mixed-use project near the city's Robertson Boulevard is scheduled to include 250 hotel rooms, while a proposed Santa Monica Boulevard site currently under city review would include 81 rooms.
Granted, the city's occupancy rate hasn't quite hit the heights of other U.S. destinations like New York, San Francisco or Oahu, and in fact, it is actually down a percentage point this year.
But even with the new projects on tap, excess traffic and a top-heavy hotel inventory pose more of a concern than the potential for overbuilding, said Baltin and Arevalo, respectively.
West Hollywood, home to 35,000, has a population density equal to that of San Francisco and more than twice that of Los Angeles proper.
"It's a very small city, so they have to be very careful about land use," Baltin said.
"It's a boutique city," added Arevalo. "We need to have a broader range of products that are available. The hotels, they're all competing against each other."