ORANGE COUNTY, CA-Expansion of the Anaheim Convention Center is complete, and Disney is set to open its new California Adventure theme park in February. These new facilities are sure to fuel the county’s hospitality industry’s profits next year, that is if room rates can be driven up.

Orange County currently has 33 hotel properties in the planning stages, which will add a total of 9,265 rooms. Still, without a lot of new product already in the market, pressure will be on raising room rates.

Industry analyst Robert A. Rauch, managing director for InterBank/Brener Hospitality in San Diego, says that Anaheim’s biggest problem historically has been low room rates for old properties that are in inferior condition.

“The product has been tired, worn and not able to drive room rates,” he says. “There has never been a question about demand for rooms in Anaheim. The only question is at what price (room rate)? It’s one of the most desirable convention and leisure markets in the United States.”

With very few new hotels being built in Anaheim, the door has been left open for other cities to take bold steps to enter the hospitality marketplace. One prime example is the City of Garden Grove. Since1998, the city has been enticing hotel developers to its borders with a business friendly attitude and lots of incentives. The recently opened Crowne Plaza Hotel is the biggest hotel to open this year in OrangeCounty, with 384 rooms, says Alan X. Raey, president of Costa Mesa-based Atlas Hospitality Group. Rauch’s company helped in the financing of that hotel.

Since Anaheim does not have the same ability as San Francisco or New York City to drive room rates higher, Rauch believes it will be up to the convention center to attract a greater mix of travelers.

“Leisure travelers are not going to fill rooms at a rate required to get that kind of return on equity. Leisure travelers are vigilante consumers looking for bargains, as opposed to travelers on an expense account looking for comfort,” he says. “The convention business is the only business that will achieve the kind of return on equity that investors expect or demand.”

Whether California Adventure steals market share away from other Southern California attractions or creates a new market share of its own is an unanswered question at this time. However, Rauch believes it will have a major impact on regional markets.

Still, there are other areas of Orange County that are prospering from the still healthy economy that can have an impact on other resort locations, like the south county area. “I think one of the things people forget is the other markets like the explosion in the Irvine market in today’s new economy. It’s one of the stronger submarkets on the West Coast. It’s a corporate market that has literally exploded in the last five years. It has some potential impact on the coastal resorts in southern Orange County,” Rauch says.

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