LOS ANGELES-Hotel owners and investors in Southern California are expected to enjoy another round of solid gains in 2001, as strength in both tourism and business travel push occupancy levels and room rates higher.

Average daily room rates in the Los Angeles area are expected to climb a healthy 4.5% next year to $126.50, according to a new forecast by the LA office of San Francisco-based PKF Consulting, following up a strong 5.6% increase in 2000 and an even better 9.4% hike the year before. Occupancy is expected to reach 76.2%, up from 75.8% this year and 73.6% in ’99.

“Hoteliers have been able to successfully push the average daily rate, which continues to climb faster than the rate of inflation,” says Bruce Baltin, SVP of PKF’s Downtown office. Those strong gains are a far cry from the early 1990s, when occupancy dropped and room rates fell due to the recession and a “stay-away” attitude among travelers in the wake of the 1992 riots.

With land for big new projects scarce, Baltin and other experts say many hoteliers will focus on renovating their existing properties next year. Demand for rooms in well-located areas remains strong, and owners can often raise rates dramatically after a major rehab has been completed.

Orange County hoteliers are also looking forward to a banner year in 2001, as millions of tourists flock to Walt Disney Co.’s soon-to-be-opened theme park next to its venerable Disneyland property and the expansion of the nearby Anaheim Convention is completed a few weeks from now. Average daily rates in the county are expected to rise 5.5% to $118.42, forecasters at PKF Consulting say, far better than its 3.8% gain this year and low 2.3% increase in ’99.

Average occupancy rates in OC are expected to surge more than two full percentage points, to 74.5% from 72.3% this year and just 69.1% in ’99. Those solid gains will come despite a big 7.4% rise in supply, as several new projects that began over the past two years come online to take advantage of the expected upturn in tourism and business travel created by the Disney park and enlarged convention center.

Lodging properties in San Diego are expected to benefit from strong business travel related to the county’s booming economy, plus a “spillover effect” created by the new Disney project to the north. Visitors to Southern California often hit attractions in more than one county, in part because the heart of Los Angeles is less than an hour’s drive from Orange County and Orange County is under an hour’s drive away from San Diego.

Average daily room rates in San Diego are expected to climb 4.3% to $144.25 in 2001, PKF Consulting says, following a 4.7% gain this year and 5.3% increase in ’99. Average occupancy should reach 77.3%, up from 76.1% this year and just 74.8% a year earlier.

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