Recession Cuts Hotel Occupancy to 63.5%; Outlook Gloomy

The county’s hotels were full only about two-thirds of the time last year as occupancy rates fell to an abysmal 63.5%, from 66.4% in 1990.

The problem: the recession, which began to cut into the travel business in 1990. Then there were too many hotels built in the county and the nation in the mid-1980s, leading to a glut of rooms.

“And the outlook for Southern California isn’t very good for this year either,” says Melissa Mills of the Los Angeles office of PKF Consulting, a hotel consultant firm that released the survey Wednesday. “In fact, it isn’t expected to get any better until 1993 or 1994. It’ll take (hotel operators) that long to work off the overbuilding.”

The survey is not exhaustive but is merely a sample of local hoteliers, so the firm cautions against assuming that the averages are precise for the entire market.

Even vacation travel suffered last year, the firm found. Hotels near Disneyland in Anaheim, which are usually crammed with guests, saw average occupancy rates drop from 70.1% to 66.3%.

While there’s no rule of thumb on how full a hotel needs to be to make a profit--that number depends on each hotel’s financial structure--occupancy rates in the 60% range mean that most of a newer hotel’s profits, if any, will probably be small.

“In the late 1980s, the problem was too many hotel rooms being built,” said Jim Burba, a Dana Point hotel consultant. “Now the problem is the recession, pure and simple.”

The survey also found that the average daily room rate rose to $71.38 at local hotels, up from $69.66 in 1990--but a little slower than the 3% rate of inflation.

And people were eating and drinking less in local hotels, after inflation is factored. The average food and beverage sales per room was $45.03 last year, up from $44.44 in 1990.

Hotel restaurant guests spent an average of $13.15 per meal last year, up from $12.57 the year before.

“Because of the recession, people weren’t staying as long or spending as much,” Burba said.

The December occupancy rate countywide averaged 49.1%; it was 52.5% in December, 1990.