Rising room rates and a modest growth in new hotel development indicate that the cost of holding a meeting in California is bound to grow more expensive in the years ahead.
The forecast for hoteliers in Southern California is particularly sunny.
According to the California Mid-Year Lodging Report, recently released by Ernst & Young, Los Angeles' overall hotel occupancy and average daily room rates reached 74 percent and $102.44, respectively, during the first half of 2005. By comparison, occupancies were 71.7 percent and room rates $95.81 during the same period last year.
San Diego is even pricier. The report showed an average daily room rate of $120.31 in this year's first six months, an 8 percent increase over the same period a year before. Meanwhile, occupancies in San Diego, which averaged 72.4 percent during the first half of the year, showed a gain of only 0.7 percent.
"Everyone in Southern California is doing great, partly because there has been little new supply growth in the past 10 years compared with other destinations," said hotel consultant Bruce Baltin, vice president of PKF Consulting in Los Angeles.
"Even when business fell off after 9/11, the decline here was not that great."
Baltin added that downtown Los Angeles, which has been adding cultural attractions in recent years, is especially benefiting from an upsurge in international leisure business to the city.
The recent groundbreaking of a sports and entertainment complex and 1,100-room convention headquarters hotel (see story on page 16) should give a further boost to downtown business.
Baltin also noted that all parts of Orange County are experiencing healthy hotel occupancies, partly because of leisure business drawn to Disneyland's 50th anniversary celebrations this year.
"The coastal resorts are doing very well, while the airport area is getting a lot of demand from business travelers. Added to that, Anaheim is having an exceptionally good convention year."
Rates and occupancies are on the rise in the San Francisco Bay Area as well, although the region, which was hard hit by the post-2000 dot-com bust, has not bounced back to its glory days.
According to figures from PKF Consulting, hotel occupancies for the first half of the year in San Francisco are averaging about 75 percent, up from 72.3 percent in 2004, while hotel rates have gone up 3.4 percent this year, reaching about $152. Thomas Callahan, CEO of PKF Consulting in San Francisco, noted that hotels in San Francisco are unlikely to reach their 2000 peak level rate of $170 until 2007.
"The first real rate gains in San Francisco did not happen until this year," said hotel consultant Anwar Elgonemy, vice president of Jones Lang LaSalle in San Francisco. "Most of the rising occupancies are being driven by leisure business and an increase in small, high-end corporate meetings."
San Francisco hotel occupancies would be higher were it not for the ongoing labor disputes that have chased away some convention groups.
Promising to keep San Francisco room rates on the increase is a relative lack of new hotel supply, most of which is coming from new St. Regis and InterContinental properties opening in the South of Market area.
"Over the next five years there will be fewer than 1,000 new hotel rooms opening in the city and, when figured in with condo conversions, it's really only a net gain of 700 rooms," said Callahan. "It's really not adequate for anticipated demand."
For planners looking for Bay Area bargains, the place to head for is San Jose.
"Occupancies in San Jose are up 3.5 percent this year and are in the low 60s, but the average daily room rate is only slightly over $100, which means you can get a room for $50 less than in San Francisco," said Callahan.
Elsewhere in Northern California, both Sacramento and the Napa/Sonoma regions are doing especially well. According to PKF figures, Sacramento enjoyed a 79.3 percent occupancy rate for the first six months of the year and an average daily room rate of $96.30, up 5.4 percent from the previous year.
Outperforming all other regions, hotels in Napa and Sonoma counties achieved an average daily room rate through June of $123, up by 12.5 percent over the year before.