Reports Suggest Marriott's Two New Downtown L.A. Hotels Badly Needed

All the hoopla surrounding the announcement of a $172 million, two-hotel project near the Los Angeles Convention Center looks like more than mere boosterism. The city needs modern hotel product to continue attracting convention dollars.

By Scott Baltic, Contributing Editor

All the hoopla surrounding the announcement of a $172 million, two-hotel project near the Los Angeles Convention Center, including the presence of Los Angeles Mayor Antonio Villaraigosa and Marriott International chairman & CEO Bill Marriott, looks like more than mere boosterism.

In light of the latest figures on the city’s hotel and convention business, the project — undertaken by a partnership of American Life Inc. of Seattle and Williams/Dame & Associates of Portland — seems like it’s in the right place at the right time. The project comprises a 174-room Courtyard by Marriott and a 218-room Residence Inn by Marriott.

Commercial Property Executive obtained a copy of a Feb. 29, 2012, Los Angeles Convention Center hotel analysis by Conventions, Sports & Leisure International for the Los Angeles Convention and Visitors Bureau. The report indicated that L.A. has only 1,685 rooms within a half-mile of its convention center — far fewer than almost all other major cities, even nearby competitor Anaheim, which has 7,800.

Further, the report states, the city has lost major conventions because of this shortfall. A series of comparisons with competing cities shows that to muster the hotel rooms that other cities have within that half-mile radius, organizers of a convention in L.A. would have to put convention-goers in hotels five or six miles distant.

When he attended the American Lodging Investment Summit in January in L.A., Scott Griemsmann, managing director at Paramount Lodging Advisors, found “very little hotel product within proximity other than the Ritz and JW,” he told CPE. He concluded that “a Courtyard and Residence Inn should do quite well as the market continues to mature and expand. The upscale select-service and extended-stay brands have certainly become the favorite asset class for investment by a lot of private and institutional investment groups.”

Overall, demand for hotel rooms in Los Angeles seems strong. TravelClick reports that hotel occupancy in Los Angeles so far this year is up 4.8 percent over 2011 and the average daily rate is up 4.7 percent compared to last year.

The new 23-story building will include 11,750 square feet of meeting facilities and 5,100 square feet of restaurant space. Construction is expected to begin this spring, with the grand opening scheduled for summer 2014. The project is being designed by GBD Architects of Portland, with interior design by Degen & Degen of Seattle. SODO Builders LLC is the general contractor.

Interestingly, the new building won’t be the area’s first with two hotels in one structure. The nearby 879-room JW Marriott shares a 54-story tower, completed in early 2010 adjacent to the Staples Center, with a 123-room Ritz-Carlton hotel, as well as 224 Residences at the Ritz-Carlton condo units on the top floors.

The new building’s site, at Olympic Boulevard and Francisco Street, till recently belonged to Anschutz Entertainment Group, owner/operator of L.A. Live, the 4-million-square-foot sports, residential and entertainment district nearby that has contributed so significantly to the revitalization of the city’s Downtown.

The hotels’ equity funding is being provided through American Life Inc., which is heavily invested in financing through the EB-5 visa program. The program, which expires next September, allows foreign investors to get a “green card,” formally known as a U.S. Permanent Resident Card, in exchange for investing at least $1 million (or $500,000 in certain targeted areas) in job-creating projects.

*This story was updated at 1:21 p.m. EST on March 29, 2012, to correct the spelling of architecture firm Degen & Degen.