With occupancies at record lows, Manchester Grand Hyatt, Paradise Point, L’Auberge Del Mar and others will temporarily shutter, leaving many jobless
Increasingly, prominent hotels in the county, from Rancho Santa Fe and Del Mar to downtown San Diego, are starting to temporarily close their doors in the wake of a pandemic that has caused their normally high occupancy rates to plunge to record lows.
With a new stay-at-home order now in place for all of California, the prospects for hotels and their thousands of workers were expected to become even more grim , giving the properties little reason to remain open for the foreseeable future. Where only months ago, hotels in San Diego were averaging occupancy rates approaching 80 percent, in the past week they’ve dropped to single digits and near zero in some cases.
Among the more well-known properties that have either already closed or are expected to close over the weekend are the posh Rancho Valencia resort in Rancho Santa Fe, the 1,628-room Manchester Grand Hyatt, the 312-room Pendry in the Gaslamp Quarter, the L’Auberge Del Mar and the 44-acre Paradise Point resort on Mission Bay.
“In light of the quickly evolving coronavirus (COVID-19) situation and in an effort to prioritize the safety and well being of guests and colleagues, we have made the decision to temporarily suspend normal hotel operations at Manchester Grand Hyatt San Diego until further notice,” General Manager Daniel Kuperschmid said late Friday, March 20, in a statement. “During this time, Manchester Grand Hyatt San Diego will not be accepting new reservations and will temporarily cease services including room reservations, food and beverage operations, and recreational activities until further notice.”
No decision has been made on whether to temporarily close the Hyatt’s nearby neighbors, the Hilton San Diego Bayfront and Marriott Marquis San Diego Marina, which rely heavily on convention and meeting business. Several major meetings have canceled in recent weeks at the major hotels and the city’s Convention Center, which is currently shut down.
While it’s still unknown how long many hotel employees across the county will be out of work, the ownership of Rancho Valencia decided to continue to pay all of its full-time employees, from housekeepers to cooks, through April 22, the anticipated date for reopening. Full-time workers will also keep their benefits, while part-time employees can use sick time.
Pebblebrook Hotel Trust, which owns a considerable number of properties throughout California, is planning to suspend operations at five of the seven hotels it has in San Diego, which together account for more than 1,100 rooms. Those hotels include the Hotel Solamar, San Diego Mission Bay Resort, and the Westin San Diego Gaslamp Quarter. The Westin is expected to remain open through the end of the month. Paradise Point and L’Auberge are also part of the Pebblebrook portfolio.
“Although it’s painful, we want to play our part, but it’s really a hard time because there are a significant number of hard-working employees and managers in this service industry who will be furloughed for a period of time and we don’t know how long this is going to last,” said Ray Martz, chief financial officer for Pebblebrook. “Is it 30 days, 60 days, six months? We’re going through an unprecedented period. I was here in D.C. during 9/11, and all of commerce didn’t stop. What’s going on is this is 9/11 every day.”
Martz worries that the substantial loss of hotel workers across the country could easily double the jobless rate. In San Diego County, there are normally an estimated 32,000 individuals employed in the hotel industry.
A recent analysis prepared for the U.S. Travel Association by the firm Tourism Economics predicts that decreased travel due to the coronavirus outbreak will exact a toll of $809 billion on the U.S. economy and eliminate 4.6 million travel-related American jobs this year. Those jobs by themselves would nearly double the U.S. unemployment rate to 6.3 percent, the report concluded.
In California, an estimated 125,454 of the total 285,122 hotel jobs — about 44 percent — will be lost, the American Hotel and Lodging Association reported Friday.
“The impact to our industry is already more severe than anything we’ve seen before, including September 11th and the great recession of 2008 combined,” said Chip Rogers, AHLA president and CEO.
In San Diego County, occupancy levels began falling in early March, and by the second week had dropped by 35 percent to an average 55 percent occupancy, according to the firm STR, which tracks hotel performance in the U.S. But as warnings about the coronavirus pandemic became more dire in the past week, local hoteliers said Friday, March 20, they expect occupancy rates to fall to single digits, with levels at near zero by April.
“We’re not looking at normalizing until October,” said Richard Bartell, CEO of San Diego-based Bartell Hotels and board chairman of the hotelier-run Tourism Marketing District. “A lot of this is trying to project how long a pandemic lasts, but we see a gradual modulating as we get to July. The greatest damage is in March and April and May.”
The Tourism Marketing District, which oversees the expenditure of revenue generated by a 2 percent surcharge on hotel room bills, expects to see a nearly 23 percent drop in those dollars for the current fiscal year, which ends May 31, said executive director Colleen Anderson. Where last year it collected about $39 million from the 2 percent levy, this year it will be closer to $30 million. That means the groups and activities it would normally support financially, such as the California State Games and Holiday Bowl, will likely not be getting money in the coming year, Anderson said. It will, however, continue to provide funding to the San Diego Tourism Authority.
The city of San Diego can expect an equally sharp drop in hotel room tax revenue, given the trend line calculated by the Tourism Marketing District. Representatives of Mayor Kevin Faulconer’s office were unable to provide answers to questions about the impact on the city budget.
While San Diego can expect to see many more hotels temporarily closing their doors in the coming weeks, longtime San Diego hotelier Bill Evans said he is not planning to shutter his three hotels — the Bahia and Catamaran resorts on Mission Bay and The Lodge at Torrey Pines in La Jolla. Very few people are staying at his hotels now, although he said some medical personnel in the county have taken up residence there.
“To close a hotel there are so many systems to keep a hotel in place,” said Evans, whose family has owned their hotels for decades. “So there’s a marginal cost savings when you close. It’s like what happens when you have a car you don’t drive, there are so many complex mechanical settings involved. We’ve never locked the door at the Bahia since 1953 and we don’t plan on locking any of them.”
The San Diego Tourism Authority, which had previously launched a major national advertising campaign to promote San Diego, has canceled expenditures for marketing, including TV ads, amounting to about $7.5 million, said CEO Joe Terzi.
“We’ve told the city not to expect TOT (transient occupancy tax) for the next several months, and after that the reduction will begin to mitigate and we’ll start to trail back up starting in July,” Terzi said.
But that doesn’t mean tourism leaders will back away from keeping San Diego in the public eye as a tourist destination. Plans are already in the works to ramp up marketing in July, focusing on the nearby drive markets in Los Angeles and Arizona.
And on social media, the Tourism Authority is already spreading the word: “Stay safe. We’ll keep San Diego warm for you.”
-- Lori Weisberg is a reporter for The San Diego Union-Tribune