Inn Trouble

The campaign to construct a sports arena at the Los Angeles Convention Center has turned out to be a long and costly struggle. But it is proving even tougher to build a badly needed hotel at the downtown Los Angeles site.

Los Angeles officials want the sports arena’s developers--Edward P. Roski and Philip Anschutz, who own the Kings ice hockey team--to also build a hotel to help turn around the money-losing convention facility. City and business leaders have tried and failed for more than two decades to attract a hotel to the Convention Center, situated in an isolated section of the downtown area adjacent to the interchange of the Harbor and Santa Monica freeways.

The lack of an adjoining hotel has limited the appeal of the facility, which was expanded two years ago but continues to be a major financial drain on the city.

Industry observers say the downtown hotel market--despite an increase in room and occupancy rates--remains too weak to support the addition of a major new hotel any time soon. The average downtown room rate of about $100 a night is far below the $130 to $150 needed to make a new hotel profitable.

“As it is today, [a new hotel] would not work,” said Bruce Baltin, a lodging consultant. “The market is just not strong enough.”

A sports arena adjacent to the Convention Center would make the area a more attractive destination and help lure a hotel operator, according to real estate executive Steven Soboroff, who is Mayor Richard Riordan’s point man on the project.

“A hotel is important for that area,” Soboroff said. “When . . . arenas are built, hotels follow. There is a great synergism.”

But although the synergy might be great, the economics are lousy, according to hotel experts.

Dieter Huckestein, who heads lodging operations for Beverly Hills-based Hilton Hotels Corp., said building a 1,000-room convention-type hotel can cost anywhere from $150,000 to $200,000 a room.

Given those high costs and downtown’s low room rates, the hotel is “not a viable proposition” at this point, Huckestein said.

The market’s sluggish weekend business is another factor that troubles Hilton President and Chief Executive Stephen Bollenbach. Making a reference to a Stephen King novel that takes place at a spooky and deserted hotel, Bollenbach said a Convention Center property “would be like ‘The Shining’ on the weekends.”

Hilton has indicated an interest in managing a hotel at the Convention Center for a fee but not in the far more risky role of developer and owner.

Industry observers say a hotel project might need further government incentives and subsidies to make it attractive to investors. But city officials, who have agreed to buy about $70 million worth of land for the project, say they will not make any further financial concessions.

Meanwhile the sports arena’s developers--who wowed downtown boosters earlier this year with drawings of a thriving entertainment district surrounding the arena--say the hotel and entertainment portions of the project have never been guaranteed.

Under the deal now being negotiated, the developers of an arena would have seven years to open a hotel on the land provided by the city, which would take the land back if the project were to fall through. For now, the only definite plans the developers have for that property are for arena parking.

“The city would like us to develop a hotel,” said John Semcken, a representative of Roski and Anschutz, but “the [current] arena proposal does not include a hotel. We would like to do that sometime in the future.”

The Berlin Wait

The Santa Monica architectural firm of Moore Ruble Yudell basked in glory after winning a prestigious international competition to design the new $100-million U.S. Embassy in Berlin. The firm and its partner, the Los Angeles planning and engineering firm Gruen Associates, expected to start work on the project soon after winning the competition.

But nearly a year later, both firms are still waiting.

The problem is financial. The State Department had expected to sell off some of its German real estate holdings to pay for the new embassy, which had been scheduled to open in mid-1999, when the German government moves back to Berlin from its current home in Bonn. However, the department has run into delays and unexpected problems selling the properties, delaying the entire project.

A State Department official declined to comment on the matter.

“No one expected that it would be delayed,” said John Ruble, whose firm and its partner invested a considerable amount of time and money coming up with a detailed entry for the competition. “Everyone still believes it will happen. It’s just a question of when.”

Jesus Sanchez can be reached by fax at (213) 237-7837 or by e-mail at [email protected]

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Hard-Sell Hotel

The downtown Los Angeles hotel market has improved but remains weak enough to limit interest in opening a Convention Center hotel. A likely site would be near a new sports arena proposed for this site at the southwest corner of 11th and Figueroa streets.

Occupancy rate

1997*: 67%

Average room rate

1997*: $99.93

* First quarter

Source: PKF Consulting