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Posh hotels bloom under stormy economic clouds

Vacancies few as new, high-end choices open doors in West L.A.

June 25, 2008|Kimi Yoshino | Times Staff Writer

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."

Depatie said Los Angeles was a difficult city to build in -- particularly in markets like Beverly Hills, Santa Monica and other pockets of West L.A. -- because the approval process was long and tedious. Once open, though, the market is favorable.

"I think we've got a bit of a tiger by the tail with this hotel," Depatie said, noting that Hotel Palomar was helped by its visible location on Wilshire Boulevard in Westwood, a mile east of the 405 Freeway.

The hotel has about 260 rooms, with an introductory rate of $249. It is a former Doubletree Hotel, but the rooms were largely gutted and redesigned. Aimed at customers from the entertainment industry, the property is getting much of its clientele from New York, with a lot of business travelers. Splashes of turquoise and red enliven the modern rooms; and animal prints run throughout the hotel, including Kimpton's signature animal-print, Turkish cotton robes.

At the all-suite London West Hollywood, on North San Vicente Boulevard near Sunset Boulevard, General Manager Vincent Mercurio said the hotel was seeing "pretty steady demand" headed into its third month of operation. The recent opening of British chef Gordon Ramsay's restaurant -- "Western European with subtle Asian influence" in Mercurio's words -- is likely to boost business.

"It doubles or triples the foot traffic and it's great exposure of our property," Mercurio said.

Most of the guests, he said, were trying to mix business with pleasure. International tourism is also picking up -- and with Web rates starting at $249 a night for at least 750 square feet of space, the hotel is a steal for people used to paying double that for rooms in New York or Paris. The London West Hollywood is the former Bel Age Hotel.

Like at the Palomar, business at the London West Hollywood is being driven by the entertainment industry, Mercurio said. "There was a fall-off earlier with the writers strike, but we have a lot of these entertainment- and film-related production business," he said. "There's a draw here that I think is working in our favor."

The SLS at Beverly Hills, designed by Philippe Starck, is the first in a new chain of luxury hotels imagined by Nazarian, chief executive of SBE Entertainment and best known for Los Angeles hot spots Hyde and S Bar. The hotel, which is to open in August, will be managed by Starwood.

Montage Beverly Hills -- a new property expected to compete in the high-end luxury class along with the Four Seasons and the Peninsula Hotel -- is scheduled to open in November.

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