Convention Center-Adjacent Hotels Set To Open Next Year Face Uncertain Landscape
At the northeast corner of Figueroa and Pico in Downtown Los Angeles, an exterior elevator runs up and down between floors of the under-construction Fig + Pico hotel as workers wearing hard hats move around the site. The glassy, Gensler-designed, 37-story hotel shares the intersection with the Staples Center and the Los Angeles Convention Center.
Though the project only got about three months into construction before the city of Los Angeles locked down due to the coronavirus pandemic, developer Lightstone avoided major negative impacts to the building of the hotel. But the property will be coming on the scene in Downtown as there is much uncertainty around when business travelers and conventions will bounce back to pre-pandemic levels.
Lightstone President Mitchell Hochberg is looking on the bright side.
“I’m happy that we’re not opening this year,” Hochberg told Bisnow.
In addition to developing the LA property, Lightstone will oversee food and beverage with a partner. Marriott will manage the hotels.
Early impacts of the pandemic didn’t hit the project hard, Hochberg said. Los Angeles didn’t halt construction when the pandemic hit like many other cities did, so work on the Fig + Pico property was able to continue with coronavirus protocols in place.
Since construction was just beginning, much of the work was outdoors and in the open air. And the reduced traffic in Downtown made it easier for deliveries to be made, concrete to get poured and roads to be closed as needed, all of which would normally be a challenge.
But there are more challenges ahead. While leisure travel is bouncing back, business travel and local conventions aren't seeing the same rebounds. Revenue from business travel in LA is down 72%, representing a decrease of over $1.9B compared to 2019’s total revenue, according to the American Hotel and Lodging Association and Kalibri Labs. The AHLA isn’t projecting business travel to return to pre-pandemic levels until 2024.
Before it was even developed, the hotel received a tax rebate deal from the city in the interest of creating more hotel rooms around the convention center. The lack of hotel rooms within walking distance of the convention center, especially compared to what was available around San Diego or San Francisco’s convention centers, was hampering the center’s ability to lock in larger events, consultants and city officials said.
Tax rebates have often been used to help close reported funding gaps in Downtown hotel projects, including the Wilshire Grand Center and the LA Live Marriott and Ritz-Carlton. Hochberg said the Fig + Pico project wouldn't have been financially feasible without the rebate.
Unsurprisingly, the convention center was deeply impacted by the pandemic. Seventeen of the 20 citywide convention events planned for 2020 canceled, according to a September presentation from the Los Angeles Tourism & Convention Board. So far this year, 14 of the 20 previously booked citywide convention events canceled. For 2022, two previously planned events have pulled the plug, but there are 20 still forging ahead and 22 events booked for 2023.
Hochberg said he thinks that the hotels are likely to do well until those other drivers rebound fully because both hotels have a broad appeal.
JLL Executive Vice President of Capital Markets Tony Muscio, who works on investments sales of hotels, said the location in Downtown will have a broad appeal, whether to travelers for business or conventions or leisure. Although both brands, AC and Moxy, are owned by Marriott, the Moxy brand is kind of the best of both worlds, bringing the reliability and consistency of big-name hotel like Mariott but with an independent boutique feel, Muscio said.
“You have a different traveler during the week and you have a different traveler on the weekend. So these properties, they're kind of going to be there for everyone,” Muscio said.
The tower will also hold 13 different food and beverage venues, including bars, clubs and restaurants. Lightstone's soon-to-be-announced joint venture partner in the food and beverage management is “a well-known food and beverage operator in Los Angeles,” Hochberg said.
The tower’s guest rooms and lobbies are designed by Yabu Pushelberg, which also worked on Moxy Times Square and Moxy Chelsea in New York, both Lightstone properties.
Hochberg said that the project already planned to have a number of outdoor spaces in the form of restaurants and bars that were planned in the pre-pandemic design, but that will have an even greater appeal now. Both hotels were also planned with features such as self-check-in, which allow for guests to have more control over how much they interact with other people.
Although he predicted that the hotels can weather the slow return of business and convention travel, Hochberg says that their return, as well as the return of throngs of visitors to games and events at Staples Center, will ultimately be vital to the projects and a big driver of the business for the hotels.
“Clearly, long term, they’re going to need that for the hotels to be successful,” Hochberg said.