Hotels construction sits on hold as developers wait for center opening.

Six companies planning downtown Los Angeles hotels have, or soon will have, approval to build 3,000 new hotel rooms but marketing and financing obstacles will keep most of them from building until 1995, nearly a full year after the $500 million Los Angeles Convention Center expansion is finished.

Lenders are skittish about financing new hotels in downtown Los Angeles and other neighborhoods because analysts say hotel values have dropped by as much as 35 percent in Los Angeles. Further occupancy drops due to the stigma of the recent riots are expected to further cloud downtown L.A. hoteliers' futures, industry experts contend.

Downtown L.A. hotel occupancy fell to 55.8 percent last year from 62 percent in 1990, according to data gathered by Pannell Kerr Forster, an accounting and consulting firm. Before the riots, some analysts and representatives of the Los Angeles Convention and Visitors Bureau felt the market was starting to firm up and additional visitors flocking to conventions in an expanded Convention Center would help them fill existing empty rooms.

Considering all the problems, Don Spivack, operations director for the Los Angeles Community Redevelopment Agency, said downtown L.A. needs more new hotels to help lure conventions to the soon-to-be enlarged center. But he said he realizes business and convention travelers are put off by images of Los Angeles in flames broadcast around the world during the riot.

At the same time, Spivack said, downtown L.A. office building owners and tenants must find ways to fill unleased space in their buildings and space that has been empty since some companies cut employment. More businesses in the area would mean more business visitors coming into town and higher hotel occupancy rates, he said.

And if economic conditions don't improve, hotel developers who already have development agreements may not start building by deadlines set by the CRA. Generally, developers must start construction within two to four years after they enter into a CRA redevelopment contract. CRA officials say due to current economic conditions, they are being lenient about extending start-deadlines if developers serious about moving forward get delayed by financing handicaps.

A CRA extension maintains project development rights but delays may bring on other financial problems for developers, said Bob Gilberg, a partner with the Century City-based law firm, Jeffer Mangels Butler & Marmaro who works with hospitality-industry clients. In the interim, the city could raise development fees and hurt the projects' financial viability, he noted.

Meanwhile, the key to downtown hotels' recovery continues to be completion of the Convention Center expansion -- and, in one expert's view, a hotel close by the center, which would help to spur downtown activity and regenerate lenders' interest.

"The Bonaventure and most of the other first-rate downtown hotels are too far away from the Convention Center," said Ron Greenspan, real estate and hospitality industry consultant with accounting firm Price Waterhouse. Looking at studies conducted by the Convention and Visitors Bureau and independent research firms, Greenspan said business travelers and many visitors who come to downtown don't stay there because there is no night life.

"They'll stay in hotels in the Mid-Wilshire District or the West Side because there are good restaurants and entertainment for them. Downtown is dead after 6 p.m." Greenspan said.

Looking ahead, Greenspan said, the hotel that All Nippon Airways plans at the intersection of Seventh Street and Grand Avenue is the only downtown L.A. hostelry that will start construction anytime soon. The 500-room Plaza Center hotel will probably get approved in the coming months, according to CRA officials.

Meanwhile, the Inter-Continental, a 470-room hotel being built by Metropolitan Structures of Los Angeles at the intersection of Olive and Fourth streets, is entering its final construction phases. Sales Manager Dan Collins said the company still is hiring sales staff and can't yet project an opening date.

Contrary to predictions by Greenspan of Price Waterhouse, Tokyo-based Mitsui Fudosan  USA Inc. has all the approvals needed to build the 390-room Halekulani at the northeast corner of Eighth and Figueroa streets. Construction is scheduled to start by the end of 1992 and will be finished some time in 1995, said CRA's Spivack. He estimated Mitsui Fudosan would spend $105 million on the project.

New York-based Harry Macklowe Real Estate Co. is negotiating with CRA officials to build a $150 million, 650-room Macklowe Hotel at the intersection of Figueroa and Second streets. Macklowe hopes to get entitlements and start construction within the next 18 months, according to Macklowe employees and CRA's Spivack. Actual construction, if all approvals are gained, wouldn't start for another 18 months or two years.

Craig Swanson, vice president of West Coast development for Macklowe, admits the downtown L.A. hotel market is soft now. Even so, his company isn't pulling back.

"It will probably take us a year after the development agreement is finalized to get financing. It will take us another three years (until late 1995 or early 1996) to build the hotel. By that time, the market will have improved," Swanson said.

As part of its multi-phase commercial and cultural center, Los Angeles-based City Centre Development Co. plans to build a 500-room hotel, Hotel At Metropolis. The project is planned for a site bounded by the Harbor Freeway, Figueroa, Eighth and Ninth streets. Spivack of the CRA doesn't know when City Centre will go forward with the development.