Hotels face expensive challenges to attract guests.

The standard measures of success in the hotel business, occupancy rates and average daily room rates, are both expected to improve slightly in 2006, although not quite at 2005 rates.

Not all of the increased revenue is increasing profits, however. Local hotel operators face plenty of hurdles like expensive renovations, upgrading technology to meet customer demands, rising health care costs and higher energy bills as they strive to keep up with the competition.

A recent report issued by the International Society of Hospitality Consultants highlights 10 global issues and challenges facing the hospitality world in the coming year. While some of them, like damage from recent natural disasters don't apply, others are more than familiar to local hotel managers. This year, hospitality consultants decided labor conditions were a primary concern worldwide, as Valley hotel managers have realized.

Bert Seneca, general manager of the Beverly Garland Holiday Inn in Universal City, said changing labor conditions have cost the property hundreds of thousands of dollars in recent years.

"What has really hurt the industry has been workers' comp insurance costs that have risen," said Seneca. "If you take a look at this property, at one point we were paying $125,000 per year, which rose to almost $600,000 in recent years. Recent reforms have started bringing the industry back in line because it's opening up the market to new clients."

Seneca said that the hotel is switching to local worker' comp insurance provider Employer's Direct Insurance. Annual premiums with Employer's Direct, Seneca said, will be in the low $200,000 range.

To deal with rising health insurance costs, Seneca said that the hotel was also able to save money by switching back to Kaiser Permanente. Kaiser was the hotel's health insurance provider a few years ago and, Seneca said, a poll of hotel employees showed that most preferred Kaiser.

Seneca said gas bills have almost tripled, but there's nothing much he can do to mitigate those costs.

Rob Balmer, general manager of the Hilton Burbank Airport & Convention Center, said his hotel saw a jump in occupancy rates last year, a 10 percent increase, but one of his biggest challenges is simply finding enough employees.

"We're trying to get creative in human resources, attending Glendale College's hotel program, and we're really pushing our team members to refer people," said Balmer.

The hotel is facing an increase between l0 and 12 percent for its workers' compensation and health care premiums costs in 2006.

Dealing with labor costs and challenges aside, hotels across the country are also forced to spend millions on renovation and construction costs, and upgrade technology to meet travelers' demands.

Consultants at the ISHC's annual meeting ranked escalating renovation and construction costs fourth on its list of concerns. Last year it did not make the top 10.

Seneca said the hotel has spent hundreds of thousands of dollars per year for the last few years to renovate guest rooms, improve landscaping and renovate the restaurant on the property. This year the hotel is going to spend at least $500,000 soundproofing some rooms that face the freeway and adding a business center for corporate guests. Selling to corporate travelers and booking meetings will be a higher priority for the hotel in 2006, he said, adding that room rates will likely rise by between 5 and 15 percent.

Later this year the Beverly Garland Holiday Inn will be offering wireless, high-speed Internet service throughout the entire property.

"It's becoming one of the standard services today," said Seneca. "High-speed, wireless Internet is becoming the coffee maker and ironing board of yesterday."

Last week, Seneca said, the hotel launched its new Web site, complete with a new city guide to help its guests plan their trips ahead of time.

Balmer said the Hilton has also made renovation a priority. It closed its convention center at the end of 2005 and spent close to a million dollars soundproofing the facility, putting in new carpets and repairing the roof. Balmer said the Hilton sales staff is making corporate meetings a high priority, and its catering business reported close to 12 percent growth last year. Convention center improvements will be important in continuing that growth, he said.

The Hilton renovated its rooms in 2001, and Balmer said the hotel may do so again in 2007.

The good news, reports the ISHC, is that rising costs make new construction especially prohibitive, and there will not likely be new hotels to take the profits that come along with increased business away from existing hotels.

One of the most challenging tasks for hotel operators is anticipating customer demands, the ISHC reports. Its members say that guests are growing more sophisticated in their use of technology, however, and hotels are in turn putting money into high-tech enhancements.

By the end of March, the Hilton will also be offering wireless, high-speed Internet access to each of its guests.

"Technology is something we're certainly focusing on. We have self-serve kiosks in the lobby so that guests can check in on their own like they were at the airport. We all have a really neat feature that guests can even check in online from our Web site at work the night before they arrive, pick whatever room they want and then they just show up at the desk and they're handed a key with a smile," said Balmer.

The Web check-in feature has been available to guests for just a month, Balmer said. Hilton installed the feature in its California and Chicago hotels first, and plans to roll out the feature to the rest of its properties.

"If a guest has a favorite section of the hotel, if they want to be up high or away from the elevators, they have control over that now," Balmer said.