Hoteliers Dusting Off the Vacancy Signs

ANAHEIM — After a fast start in 1997, Orange County hoteliers saw their occupancy rates drop in June, signaling a slowdown from the summer frenzy of 1996.

On average, 76.3% of the county’s hotel rooms were filled in June, down from 82.8% in the same month a year ago, according to a study by Los Angeles-based PKF Consulting. Occupancy also dipped slightly in May compared with the same month a year ago, marking the first back-to-back monthly decline since the recession and natural disasters of the early 1990s.

The drop was particularly noticeable in Anaheim, where 78.5% of the city’s rooms were filled, down from 88.5% in June 1996, when record crowds flocked to Disneyland to see the farewell season of the Main Street Electrical Parade.

Industry watchers had expected some drop-off in occupancy this year as Electrical Parade hysteria came to a close. But additional factors made for a bigger decline than expected in June, according to Cheri Chester, general manager of the Ramada Conestoga in Anaheim.

Chester said foreign vacationers have been pinched by the strong dollar, while the airlines waited until early July to launch the big summer fare deals that lure bargain-hungry domestic tourists. Additionally, Light Magic, Disneyland’s much-hyped replacement for the Electrical Parade, has failed to live up to expectations.

“It was like somebody turned off the phone lines,” Chester said. “We went from a strong start in the first five months of the year to a really scary slowdown in June.”

The June gloom motivated hoteliers such as Ned Snavely, general manager of the Anaheim Marriott, to go after leisure travelers with more aggressive, niche marketing campaigns.

“We’re hoping to finish the summer strong,” Snavely said. But the early weeks “have been below expectations.”

Anaheim wasn’t the only Orange County hotel market to see fewer heads in beds. June occupancy declined everywhere except for South Orange County, which saw occupancy increase to 81.4% from 77.9% in June 1996.

Despite the lousy June figures, occupancy for the first half of the year still topped the first six months of 1996, thanks to robust winter and spring travel. Countywide occupancy averaged 75.6% for the January to June period, up slightly from 74.4% for the first half of last year.

The other bright spot for the industry was room rates. After years of sluggish rates, Orange County hoteliers this year began raising their prices and so far it looks as if those increases might stick.

In June, the average countywide room rate reached $93.32, up 11.6% from June 1996. Year-to-date, room rates have increased 12.6% over the first half of 1996.

With occupancy now falling, some hoteliers may resort to discounting to fill their rooms. But Chester doubts it will be an all-out fire sale.

“Costs have increased too much,” Chester said. “Most of us can’t afford to do it.”

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Hotel Occupancy Drops

Orange County’s hotel occupancy rate dropped 7.9% in June while room rates, which were kept artificially low during the recession, increased more than 11%. June hotel occupancy, average daily room rate and percentage change from June 1996:

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June Occupancy Rate % change Anaheim 78.53% -11.2% Airport area 74.05 - 4.9 North Orange County 77.07 - 3.2 South Orange County 81.39 4.5 Newport Beach 68.47 - 8.1 Countywide average: 76.33% - 7.9%

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June Average Daily Room Rate % change Anaheim $93.88 8.9% Airport area 87.53 16.9 North Orange County 62.29 9.8 South Orange County 107.27 13.1 Newport Beach 127.60 14.1 Countywide average: $93.32 11.6%

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Source: PKF Consulting