Positive Outlook for the Hospitality Industry in Anaheim California

The big headline for the week ending January 26, 2013 was that Anaheim, California was ranked number one of the 25 major markets in the U.S. Hotel industry. According to Smith Travel Research (STR), the Anaheim-Santa Ana area of Southern California ranked number one in occupancy rates and number one in RevPAR (Revenue per Available Room). Hotels in Anaheim also came in number three in ADR (Average Daily Rate).
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Anaheim-Santa Ana Key Performance Statistics: January 20-26, 2013

• Occupancy Rate was up 16.4% to 74.7% when compared to the same period in 2012
• ADR was up 15.6% to $129.64 when compared to the same period in 2012
• RevPAR was up 34.5% to $96.87 when compared to the same period in 2012

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Before hotel owners in Anaheim get overly excited, it must be noted that STR reports hotel industry performance statistics every week and those figures, while very impressive, only indicate a small snapshot in time. In prior weeks, Anaheim did not fare nearly as well and there were even weeks that were worse than the prior year’s figures.

In 2012, Anaheim and all of Southern California welcomed an increasing number of both domestic and international tourists. With visitors feeling better about their personal financial situation, travel and tourism was a bright spot in the U.S. economy. The hotel and hospitality industry added jobs and was able to boost the rates they charged for rooms due to high demand.

A large contributor to the excellent performance of hotels, restaurants and other members of the hospitality business in Anaheim was the opening of the Disneyland Resort’s Cars Land. The highly promoted and very successful new attraction boosted occupancy of all the hotels in Disney and within the surrounding area. In addition, Orange County’s John Wayne Airport began offering service to and from Mexico, which brought more people to the Anaheim area.

Projections of Average Occupancy and Room Rates for 2013

PKF Consulting, a leader in gathering data for the hotel and hospitality industry, projected hotel occupancy and room rates for 2013 by the different areas of Orange County. They projected hotel occupancy rates in the Greater Anaheim area are to be 74.5% with rooms selling for an average of $120.06 per night.

Other areas like Newport Beach and Coastal Orange County were projected to have slightly lower occupancy rates – 73.7% and 73.8%, but much higher average daily room rates. Average rooms in Newport Beach were estimated to fetch $218.30 per night, while rooms in other coastal areas were projected to cost $259.30 per night.

Around John Wayne Airport, projected average occupancy rates are the highest in all of Orange County at 76.3%. North Orange County hotels are projected to have both the lowest occupancy rates (72.3%) and the lowest average rate per room ($94.30) in Orange County.

Low Supply and High Demand for Hotel Rooms

According to the Anaheim Orange County Visitor and Convention Bureau, there are more than 20,000 hotel rooms in the Anaheim Resort area. During special events at Disneyland or the nearby Anaheim Convention Center, occupancy rates surge and room prices tend to also go up. In the hotel industry, pricing is closely tied to the economic forces of supply and demand.

Price elasticity is probably best demonstrated a few hundred miles away in Las Vegas. If you want to get the lowest rates for accommodations, plan to stay during the early part of the week. Hotels in Vegas lower their room rates Sunday through Thursday when fewer people are in town. On Friday and Saturday, the city fills up with weekend visitors from nearby California, and the rates can almost double. It is all a matter of supply and demand.

Supply of Anaheim Hotel Rooms Remains Relatively Unchanged

New hotel construction in Orange County has not kept up with the growth in tourism and visitors over the last few years. While Marriott opened a 130 room Residence Inn in San Juan Capistrano in the past year, there were no new hotels opened in Anaheim.

A luxury hotel developer was set to begin construction on two luxury towers by the GardenWalk Shops, but the project has been held-up. Area residents are upset that the city has ignored their needs while agreeing to a very controversial $158 million tax subsidy for the project’s developer. It is still not certain if both sides can come to an agreement, or if the hotel towers will ever be built.

Existing hotels in Anaheim have been able to increase their room rates because the supply of new rooms has not increased by any significant measure. Some hotels in Anaheim have engaged in substantial renovations in recent years. Hotels are also offering more amenities and upgrades that help to drive traffic to their properties.

The combination of a limited supply of hotel rooms and more people wanting to spend time in Anaheim has hotel owners and managers smiling. Compared to the rest of the nation, Anaheim hotels are doing exceedingly well. Anaheim hotels boast occupancy rates in excess of 70 percent and average rates per room in excess of $120. Nationally, according to Smith Travel Research’s statistics, occupancy rates are just 61 percent and room rates stand at just over $110.

2013 Will Be another Great Year for the Hospitality Industry

Travel and tourism does well when the economy does well. In spite of such political issues like the national deficit and immigration reform, ordinary people are feeling better about their prospects for the future. Consumer confidence has risen, and international travel to the United States and Disneyland will see gains. This comes as the U.S. Dollar weakens and it becomes less expensive to travel from Europe and other parts of the world.

Of course, there can be temporary slowdowns in visitor count due to unforeseen events. However, the strong trend is for continued growth in the number of people coming to Anaheim and Orange County, California. Hotels will continue to enjoy higher RevPAR and a better bottom line than 2012.

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