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Orange County Luxury Hotels Gird for Battle

June 23, 1985|BRUCE HOROVITZ | Times Staff Writer

There is a tastefully quaint room next to the vault at the Ritz-Carlton in Laguna Niguel where hotel guests can be alone with their money. When they look up from their safe-deposit boxes, they see themselves in an antique mirror encircled by rich mahogany walls. It is a splendid place not just for counting money but also for counting blessings.

Not everyone is blessed with the wherewithal to stay at the $100-million Ritz-Carlton, where rooms cost as much as $1,200 a day. For that, guests get fresh roses on their nightstands, English bone china under their crumpets and white gloves on their doormen.

Said one Washington-based sales manager before recently diving into one of the Ritz-Carlton's two swimming pools, "I'm probably the first person to use either of the pools in two weeks. But who cares? The elegance of this place is titillating."

Behind such elegant scenes, luxury hotels are preparing to slug it out for business. About 32 new hotels--most of them upscale--are being planned for Orange County, where first-class quarters have been evolving over the past two years at a hotel-a-month pace.

Orange County is being closely watched by the nation's hoteliers. And, as a test to determine the depth of Orange County's luxury hotel market, no hotel is being eyed more closely than the Ritz-Carlton, which, despite its rich appearance, is troubled by low occupancy rates and problems with creditors.

Overestimated Market

Developers may have overestimated the size of the luxury hotel market not only in Orange County, but also nationwide, analysts say. The number of first-class hotel rooms in the United States climbed more than 10% last year, nearly twice the growth rate of mid-range rooms. Of the estimated 2 million hotel rooms nationwide, more than 700,000 are now in the upper end.

Some industry analysts wonder whether the expansive luxury hotel growth won't die sooner than later. In major cities such as Los Angeles, San Francisco, New Orleans and Houston, an overabundance of first-class rooms has recently forced owners to slash rates or offer other incentives to lure customers.

- The Westin Bonaventure in downtown Los Angeles shaved 23% off the price of many rooms last week, prompting speculation that other hotels there might follow suit.

- The Ramada Renaissance Hotel in San Francisco will guarantee a room rate of $95 next year to guests who pay full fare--up to $150 per night--for a room this year.

- The Hotel Intercontinental in New Orleans is offering summer discounts of more than 60% on many single rooms, including weekend rates as low as $55 on rooms that normally cost up to $140 per night.

- The Hotel Meridien in Houston has a discount program in the works that will offer convention groups one free room for every 50 rooms booked.

Orange County's luxury hotels are offering similar price breaks, hotel executives say. Although a post-Olympics tourism surge and Disneyland's 30th birthday celebration have helped fill Anaheim-area hotel rooms this year, hotel executives acknowledge that the emerging hotel glut could send them back into the doldrums before next summer.

The specter of falling occupancy rates has caused some aggressive hotel companies to curtail development plans.

Even Marriott Corp., which has built nearly 2,000 first-class hotel rooms in Orange County in the last five years, has no plans to add any more. "The area won't sustain it," said J. W. Marriott Jr., president and chief executive.

"You can't continue to build first-class hotels at the rate we're building in this area," said David R. Kinkade, a consultant at the Costa Mesa office of Laventhol & Horwath, an accounting firm.

Rush of Development

Mark Kallenberger, manager of the consulting division of Pannell Kerr Forster's Newport Beach office, says Orange County is seeing an "excess of demand" resulting in a "rush of upscale hotel development."

The catalyst for recent sharp growth in Southern California was the 1984 Summer Olympics. Wanting to cash in, a number of major hotel developers in the early 1980s ordered studies of the county's growth picture. They found that Orange County was about to undergo a boom in office development and that the area's lodging would not be enough to accommodate the transformation into a major business center.

These changes were a long time coming--especially in Orange County. Disneyland is still a draw, but no longer do the county's major hotels rely exclusively on the famous theme park to fill their rooms. Many of the county's overnight guests don't even see the Magic Kingdom. And some of the finer hostelries actually frown on guests waltzing through their lobbies wearing Mickey Mouse ears.

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