LOS ANGELES, CA-Sinking occupancy levels and declining room rates continued to vex the county’s hotel business in the first quarter of 2002, according to a new report, which says the combined effects of an economic slump and the Sept. 11 terrorism depressed the hospitality just as much in the first part of this year as they did last year.

Through the first quarter of 2002, the county’s occupancy has remained below 70% (66%), while average rates have declined by 15%, the report from HVS International says.

Brisk business in the entertainment industry has bolstered occupancy in some submarkets, the HVS report says, and Los Angeles has fared better than many other parts of California. But most submarkets continue to post year-over-year declines after a 2001 that was marked by what the report calls “”weakness unseen since the early to mid-1990s.” The report for the first quarter of 2002 resembles the full-year 2001 results in many respects. In 2001, occupancy in the Los Angeles area dipped to below 70% (66.8%) for the first time since the mid-1990s, when “the lingering effects of the Persian Gulf War, civil unrest, the Northridge Earthquake, and other natural disasters were finally relenting.”

The county was fortunate in 2001 in that the supply of rooms grew by only 1% during the year, somewhat softening the effects of the slowdown. That was still the case in the first quarter this year, the report says, pointing out that relatively few new rooms are expected to be added soon because of “a dearth of available financing and the difficult development environment.

The HVS report notes that L.A. County consists not of one monolithic market but a series of submarkets, each of which can sometimes fare better or worse than the others, depending on which industries the specific submarkets rely upon for most of their buisness. The report says, however, that the entire county continues to feel the effects of Sept. 11 and the recession this year, as it did last year.

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