Opening of new downtown hotel looks to add to industry problems.

Ordinarily, a new hotel would likely be viewed as a sign of good economic times, especially if one hadn't been built in the area for 10 years.

But that is not the case with the new Hotel InterContinental in downtown Los Angeles, which is nearing completion and is set to open Dec. 1.

The $100 million, 439-room hotel, part of the California Plaza complex on Bunker Hill, couldn't be opening at a worse time, according to hotel industry experts and operators.

And as far as the affect of the opening on other downtown properties, the last thing they need is more competition, the experts and operators added.

But nevertheless, some civic and industry boosters see positive news and note that over the long run, the downtown area needs more hotel rooms.

A spokesman for the Los Angeles Convention & Visitors Bureau, Gary Sherwin, said the downtown area will need more rooms when the $500 million expansion of the Convention Center is completed in a year. Right now there are about 9,000 hotel rooms within a two-mile radius of the central business district and Sherwin said another 1,000 may be needed.

James Simkins, the managing director of the downtown Westin Bonaventure Hotel, said having a name-brand property like an InterContinental in the central business district will enhance the area's appeal.

He noted the addition of a major new property will initially hurt business at his hotel but over the long run, "It can help because it will help the image of downtown and bring in new business."

The overwhelming feeling is that this is not the best time to be opening a new hotel, particularly downtown.

"Occupancy and rates are already soft and this (InterContinental opening) is going to drive them down further for other hotels downtown," said an industry analyst who did not want to be identified. "Rates at the hotel are going to have to be deeply discounted and that is going to force other hotels to follow."

Hotel room occupancy at downtown properties has been below 60 percent for the past 18 months. For the six-month period that ended in June, downtown occupancy was 53.9 percent and for the same period in 1991, it was 51.4 percent, according to PKF Consulting in Los Angeles, The break-even point for most hotels is between 65 percent and 67 percent.

Room rates have also been falling at downtown properties, which creates a cash-flow problem. For the first six months of this year, the average daily room rate was $93.25; for the comparable period in 1991, the average rate was $94.65.

In better economic times, downtown hotels would charge an average nightly rate of about $120.

The general manager of the InterContinental admits it is going to be hard and the property, located at 251 S. Olive St., will probably lose money for at least a year.

"This is the worst time to be doing this," said Michel Tourniaire. "But there are things we can do, like being better than our competition."

He said the property is hoping for occupancy in the first year of between 40 percent and 50 percent.

The new hotel, which was developed by Los Angeles-based Metropolitan Structures West Inc. and several other entities, including at least one Japanese firm, will be managed by InterContinental Hotel Group. The company operates 100 hotels in 47 countries, including nine in North America. It will be InterContinental's first hotel in Los Angeles.

The 17-story property will be geared to business travelers and will include 20,000 square feet of meeting space. The downtown Westin, by comparison, has more than 26,000 square feet of meeting space.

Tourniaire said the hotel will employ about 200 when it opens.