This tourism season's buzzword may be "staycation" -- as in, it's too expensive to drive or fly anywhere -- but neither analysts nor hoteliers expect soaring gas prices and the struggling economy to spoil the debuts of a rash of new Los Angeles hotels.
Kimpton's trendy Hotel Palomar and the London West Hollywood, which boasts Gordon Ramsay's first West Coast restaurant, both recently opened. Later this year, guests are slated to start checking in at the Montage Beverly Hills, sister of the luxurious resort in Laguna Beach, and the SLS at Beverly Hills, formerly Le Meridien and the first hotel venture for L.A. night-life king Sam Nazarian.
In total, the hotels contain about 960 rooms, though only the Montage is considered new construction. The others are renovated and rebranded hotels that had pulled rooms off line for several months during their overhauls.
The projects, either boutique or luxury offerings, were all planned and funded when the economy was booming, only to reach completion now, when nervous consumers are reluctant to spend money and travel.
But analysts and hoteliers said demand has far outstripped development. Room rates are still rising and the customers keep coming.
"Los Angeles is one of the best areas in the entire country to build a hotel," said Alan Reay, president of Atlas Hospitality Group. "It's that strong. These hotels will open extremely well and be very profitable. People paying $300, $400, $500 a night are really not worried about gas prices."
All four properties are in the West Los Angeles market, which is "historically healthy" with a track record of customers willing to pay for quality, said Bruce Baltin, senior vice president of PKF Consulting in Los Angeles.
Hotels in that part of town had occupancy rates of about 75% last year with an average daily room rate of $298.50, Baltin said. Although occupancy is projected to slip a hair to 74% this year, average room rates are predicted to rise to $315, proof that the market remains strong, Baltin said.
Last year, Los Angeles County had occupancy levels at 77%, an all-time high, Baltin said. Occupancy remains strong but is down a couple points this year.
"The challenge with building a hotel is that it takes years and years and the exact environment you're going to open up in, you don't really know," said Mike Depatie, chief executive of San Francisco-based Kimpton Hotels. "In the short term, it's a bit of a rough sea. But everybody's investing in the hotel business for the longer term."
