Why Hotel Developers Can't Get Enough of Downtown LA
Just as the mega-merger of Marriott and Starwood moves forward, Bisnow gathered some of the biggest names in the hotel industry yesterday for our 3rd Annual LA Hospitality Boom event at the InterContinental Hotel in Century City, including Starwood VP for North America Development West Tiffany Cooper.
Tiffany (right with Shenzhen Hazens Group executive project director Sonnet Hui) told the more than 300 attendees that Starwood is opening its brands up to new owners/developers because it's an exceptional opportunity, noting that LA's shortage of hotels presents opportunities for hotel developers. Tiffany points out Starwood has strong brand recognition in China, and contends that with the high number of Chinese visitors passing through, whoever owns the Asia hotel market, owns the LA hotel market.
Sonnet says before a brand was selected for Hazens’ proposed $700M W Hotel & Residences in Downtown LA, her company conducted a lot of research and picked Starwood because it is a reputable brand in China and well liked.
“The merger of Starwood and Marriott expands our opportunities,” she says, noting that Hazens is investing heavily in LA because it's a gateway for Asian travelers, whose numbers are expected to increase 10-fold by 2020. Additionally, 48% of all US trade with China passes through LA-area ports. Starwood also acquired the Sheraton at LAX and is building a new Sheraton in San Gabriel, which has a strong Asian population.
Destination Hotels & Resorts SVP of acquisitions and development Julie Purnell (flanked by Arent Fox partner Rich Brand and Gensler principal Tom Ito) said her independent boutique hotel brand loves adaptive reuse and is looking for opportunities in Downtown, where a vacant historic building can be transformed in a way that is an economic home run.
She notes that her company’s parent, Lowe Enterprises, is developing an exciting, transit-oriented mixed-use project at the Metro station in Culver City.
Rich, who served as moderator, said the Chinese hotel projects in Downtown LA are part of big mixed-use developments. He asked Tom if combining hotels with other uses increases design challenges. Tom, whose company is the architect of record on two of the big Downtown Chinese mixed-use developments, said combining uses creates a sense of place and experience. "By combining all three (hotel, residential and retail), you create something unique to its location.”
The panelists also discussed the impact of new nontraditional lodging concepts like Airbnb on traditional hotel business. Tiffany said Airbnb is increasing in popularity and now captures 16% of corporate lodging business and 18% of leisure travelers. “The potential danger is a market ADR ceiling,” she says.
Tiffany said in Santa Monica, for instance, visitors staying an average of 5.3 nights are not staying in traditional hotels. She notes that when a big conference or other event comes to town and creates a room shortage, hotels have traditionally raised rates. Airbnb may impact this practice, as savvy travelers will use Airbnb. As result, $2.6B was spent on nontraditional lodging that could have gone to traditional hotel space, Tiffany adds.