Alan X. Reay, president of Atlas, says the hotel industry consulting and brokerage firm's mid-year report shows that only three new hotels have opened in L.A. County thus far in 2003, for a total of 248 new rooms. This is down by approximately 385 rooms, or more than 61%, compared with the number of new rooms opened during the same six months in 2002.

At the same time, the Atlas survey shows that Los Angeles County has five hotels under construction with 574 rooms, down from nine hotels with 1,053 rooms at the same time last year, a 45% decline in rooms under construction.

Reay tells GlobeSt.com that the decline in construction this year is a lingering effect of the terrorist attacks on Sept. 11, 2001, which crippled the hospitality industry. Many if not most of the hotels that opened in L.A. County and elsewhere in the country during the first half of last year were already under construction or too far along to halt development when the Sept. 11 attacks occurred, he says. But after the Sept. 11 attacks, hotel planning, financing and construction slowed dramatically, producing the sharp drop in newly opened hotels that is reflected in the most recent Atlas survey.

However, Reay notes, the resistance to construction of hotels is waning. "Lenders are coming back into the market," he says, although lenders are still requiring developers to invest quite a bit of equity, about 40%. Los Angeles County also is hampered by a shortage of available sites for new hotels. It isn't just a shortage of land, Reay explains. "We have a lot of people who want to develop, but they are competing with retailers who also are looking for sites, and retailers can afford to pay more for the land." Another factor is that the prices being paid for hotels are still below replacement costs, so development is not likely to accelerate much until financing becomes more favorable and prices exceed replacement costs, Reay points out.

The new hotels opened in Los Angeles County thus far this year include: Holiday Inn Express in Valencia, 118 rooms; the Ambrose Hotel in Santa Monica 77 rooms; and the Hawthorn Suites in Manhattan Beach, 53 rooms.

Those under construction include the 205-room, Hilton San Gabriel, the 176-room Ayres Hotel Hawthorne, the 75-room Best Western Long Beach, the 68-room Best Western Burbank, and the 50-room Microtel LAX.