What projects are either currently under construction, being rehabbed, or planned for next year will tend to be more upper-end hotels commanding higher room rates, says Alan X. Reay, president of Atlas Hospitality Group in Costa Mesa.

"It's very prevalent in the hotel industry today to rehab an existing property because the cost of rehab is much less than building brand new," Reay says. "We're forecasting that sales prices of existing hotels will increase between 7% and 10% next year. There is not a lot of new hotel supply being built in Orange County, which is resulting in increased value for existing hotels."

Due to the lack of available land to build on throughout Orange County, developers are paying top dollar for land to build whatever new projects they can on infill sites. Disney, for example, is building the Grand Californian Hotel as part of its Downtown Disney entertainment and retail complex, with the hotel nestled inside the $1.4 billion California Adventure park on what used to be a section of Disneyland's parking lot.

In close proximity will be the Pointe Anaheim project, a 650,000-sf retail and entertainment complex featuring three hotels that the developers say will be completed in the second half of 2003. However, due to snags in obtaining the required financing, the project hasn't broken ground yet.

What projects are currently under construction and expected to be completed this year include the Marriott Renaissance Hotel nearby Disneyland in Garden Grove. The $29-million, 327,360-sf project, with 372 luxury rooms in a 13-story structure, is scheduled for completion in November.

Further south there is the Residence Inn in Irvine, with 174 suites, scheduled for completion by mid-2001. Reay estimates development costs for that project at about $21.5 million. In Newport Beach the Extended Stay Suites, consisting of 164 suites, is about to open in February for $16 million, Reay estimates.

In Santa Ana the Candlewood Suites will be opening in March 2001 with 119 suites, at an estimated development cost of $11 million. On the other side of the 55 freeway, a new 251-room DoubleTree Hotel will break ground in the next couple weeks.

Further south there is the Ritz Carlton at Treasure Island in Laguna Beach being built on the site of a former mobile home park. And in Laguna Niguel the $240 million St. Regis Monarch Beach will open its doors with 400 rooms, including 74 suites, in August--giving the Ritz Carlton Laguna Niguel across the street some competition. The Ritz itself will be undergoing a rehab next year, demolishing two tennis courts to make way for a 32,276-sf spa facility for guests.

Expansion of the county's convention center also will have a major impact on the hospitality market. This project will make it the largest convention facility on the west coast, with the ability to host very large trade shows, and should give Las Vegas a "run for its money," Reay contends.

Instant Insights /

Analyst Predicts Increase in Hotel Occupancy for 2001

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