Swank Hotels Enjoying a Boom Year.

The rich are arriving in droves at L.A. hotels.

As the local hotel industry posts another record year, the biggest increase in occupancy is being seen at luxury hotels in Beverly Hills and Santa Monica, where business executives from Europe, Asia and Silicon Valley are checking in while searching for opportunities in booming L.A. industries like tech and entertainment.

The super-strong national economy, combined with rapid economic growth in many other parts of the world, have made those corporate travelers comfortable paying top dollar to stay at some of the most luxurious accommodations in the United States, if not in the world.

The types of wealthy visitors flocking to L.A. also reflect the dynamics of the local economy. In search of creative Internet content, Silicon Valley millionaires are hobnobbing with local entertainment big wigs; European merger-and-acquisition specialists are hitting town in search of deals, and an assortment of wealthy tourists from Asia, the Middle East and Latin America are rediscovering the city.

Particularly noteworthy is a big increase in the number of overseas visitors during the first part of the year. According to the Los Angeles Convention and Visitors Bureau, the number of European visitors to Los Angeles was up by 14.2 percent for the first four months of 2000 (the latest available data), compared to the like period in 1999. The number of visitors from Asia is up 8.2 percent over that same period.

"This is a significant increase," said Mary Carley, associate vice president for international marketing services with the LACVB. "Overseas visitors spend on average of 15 percent more per day than domestic visitors, and Europeans in particular tend to be drawn to the high-end hotels in Beverly Hills and Santa Monica."

According to the latest data from PKF Consulting, which tracks the local hotel industry, the occupancy rate at Beverly Hills hotels jumped to 77.2 percent in May (the most recent month available), a sharp spike from 63.6 percent in May 1999.

Countywide, the occupancy rate for all hotels increased to 77.7 in May, up from 72.6 percent in the year-earlier month.

Beyond Beverly Hills

It's not just Beverly Hills that saw a hefty increase. High-end hotels -- those charging more than $150 per room per night -- across L.A. County saw their average occupancy rate rise from 69.0 percent in May 1999 to 76.3 percent in May 2000.

Clearly, Los Angeles is attracting a lot more visitors who are willing to spend top dollar to stay at some of the priciest hotels.

"When you've got the occupancy rate in Beverly Hills reaching the 80 percent region, you know that the super-rich are coming to L.A.," said Les Benson, president of the Hotel/Motel Group of the Southern California Business Association. "Clearly, this is a very strong year for the hotel industry."

Local hotels report strong increases from a wide variety of big-spending visitors, including domestic business travelers from the Bay Area and East Coast, music and other entertainment industry types from the United Kingdom, oil tycoons from Saudi Arabia, and wealthy tourists from Latin America.

"During the first six months of the year, we've been seeing increases from the entertainment industry, which is the majority of our business during that part of the year," said Jack Naderkahni, general manager of L'Ermitage Beverly Hills. "During the summer months, we're seeing more leisure travelers, and there has been a return of visitors from Japan and an unusually high number of visitors from Latin America, Brazil and Argentina who typically go to East Coast cities such as Miami or New York."

The 124-room L'Ermitage, reopened its doors last year after a $60 million renovation, with room rates starting at more than $400 per night. The hotel is one of L.A.'s most exclusive accommodations. According to Naderkahni, the high price tag has not been a deterrent to filling rooms at the hotel, which he said is ahead of its sales projections for the year.

Meanwhile, the Regent Beverly Wilshire also has had little trouble filling the 125 new rooms it added last year, according to Bill Doak, director of marketing.

"We've seen a considerable increase from last year," he said. "We're seeing more business and more leisure travelers this year. Because of the high oil prices, there are a lot more visitors from the Middle East, but we're also seeing pretty substantial increases in the number of visitors from Latin America and Mexico, even if they're still a relatively small number, and also from Asia and Europe."

Wealthy visitors from the Middle East have for a long time come to L.A. for lengthy vacations to escape scorching heat back home during the summer months. High crude oil prices mean that this year they don't have to skimp on their accommodations.

Attracted by dot-coms

Notwithstanding the influx of super-rich international business executives and tourists, the bulk of visitors coming to L.A. are domestic travelers. Among them, visitors from the San Francisco Bay Area are the largest contingent, making up almost 8 percent of the total number of overnight visitors last year. Those visitors from Northern Californian include a slew of wealthy Silicon Valley executives coming to L.A. to forge links with the entertainment industry and local Internet and new-media entrepreneurs.

"That's definitely one thing we've been seeing more of this year," said Armella Stephen, general manager of Shutters on the Beach in Santa Monica. "Obviously, they like to stay here because of the large number of dot-coms that have set up business in Santa Monica."

Another trend Stephen has noticed this summer at Shutters is that more and more executives are combining business and leisure travel. They extend their business trip and fly their families out to spend a few extra days vacationing on the beach. As a result, Shutters has been packed this summer with more families and kids than it has before.

As in Beverly Hills, the Santa Monica high-end hotel landscape has seen an increase in supply since last year, with a number of new facilities opening along the beach. But the new supply has had no adverse effect on either the occupancy rate, which at 83.3 percent for the year to date is the highest in L.A. County, or the average daily room rate, which at $182.98 per night is up 7.1 percent for the year.

"Business is very strong in spite of the stock market fluctuation," said Sig Ortloff, general manager of Le Merigot Beach Hotel, which opened in Santa Monica last fall. "Many people seem to have made their travel plans in advance and are committed to have a good time and enjoy their vacation."

Ortloff believes, however, that demand will start to level off by next year and that competition between the beachfront hotels in Santa Monica will become fierce as more hotels go after a limited number of affluent travelers.

Hurt hi strike

At the same time, hotels that tend to rely on the entertainment industry, as do many of the top-line hotels in Beverly Hills and Santa Monica, are keeping a wary eye on the ongoing strike by the Screen Actors Guild against the producers of commercials.

"We're feeling a little bit of a pinch because of the strike," said Joyce Bonaventura, a spokeswoman for the Four Seasons Hotel. "But it's hard to compare it because we've closed down a large number of rooms since the spring because we're building a new spa at the hotel."

At L'Ermitage and Shutters, business generated by the commercial production industry has also been impacted by the strike, although not to the extent that it has made a major impact on the hotels' overall performance.

However, there is a widespread feeling that the luxury hotel business will slow down a notch next year, as a less boisterous national economy threatens to make travelers and businesses less inclined to pay top dollar for accommodations.

"Traditionally the hotel business is the first to be affected by an economic slowdown and the last to benefit from a boom," said Ali Kasikci, general manager of The Peninsula Beverly Hills, "And especially the high-end market is a direct reflection of the health of the economy. But how well we cope with a slowdown depends on how well positioned we are as a hotel. Nobody is going to sit back, but everybody will watch which industries are doing best and start to reach out to new sources of business."