LOS ANGELES— The hospitality industry in California is beginning to show signs of life, according to Ernst & Young’s Hospitality Advisory, with the key markets of Los Angeles, Orange County and San Diego now improving. Ernst & Young’s California Mid-Year Lodging Report found that San Diego is fairing the best, with hotels expected to recover in the next three months. Los Angeles, more dependent on corporate travel and conventions, will likely be depressed for the next 10 months. The tech-bust epicenter, San Francisco, is facing the toughest market in the state and will be on the ropes until early 2003. Report author, Jeffrey Dallas, E&Y’s West Coast Hospitality Practice Leader, predicted in February that most California hotels would have to discount rates to increase their occupancy. A quick look at the major markets through the first six months of 2002 shows that hotels reduced prices on average between 3-15%. San Francisco continues to struggle, with average daily rates discounted 15.2% so far in 2002. San Diego led the CA markets with a rate discount average of 2.7%. Occupancy rates, although still below normal, are improving as well. San Francisco’s occupancy, which was down 23% in January, by June was only down 6.7%. The Los Angeles market occupancy was down as much as 9.8% in February and by June was only down by 5.8%. The Anaheim/Orange County hospitality market was down 12.7% in January and by June was only down 7.3%. San Diego, the best performing market, was down 10.3% in January and only down 1.9% by June.
