In mid-March, an employee at La Peer Hotel walked into the general manager’s office looking like he had just seen a ghost. He informed him that there had not been a single new reservation in 36 hours. In fact, people were cancelling. Quickly.
Normally, the hotel sees an annual occupancy rate of 80%, according to general manager Nick Rimedio. Today, the occupancy rate is hovering somewhere between 2% and 3%. Most of the 100-plus hotel employees have been furloughed until further notice, and the few that are still working are on call 24 hours a day, seven days a week.
La Peer Hotel is one of five West Hollywood hotels that remained open as the economy began to reel from the pandemic. There are 21 hotels total in this 1.9-square mile city.
“It was like the Titanic,” said Rimedio. “We hit an iceberg and then it went down very quickly.”
Tourism is the No. 1 economic driver in West Hollywood, according to Genevieve Morrill, president and CEO of the West Hollywood Chamber of Commerce. Research by the West Hollywood Travel and Tourism Board shows that the roughly 3.6 million visitors coming into the city every year spend about $1.8 billion here. A quarter of the city’s labor force works in hospitality and food services.
In January, the city saw record high numbers of visitors coming into the city and revenue from tourism, said the tourism board’s president and CEO Tom Kiely. Then, March abruptly “fell off a cliff.” Today, visitor volume in the city has plummeted by 95%.
“People are very leery of travel,” said Kiely. “A lot of people don’t feel comfortable traveling, they don’t know what the parameters are about traveling, they don’t know what’s open and what’s not.”
At this point, Kiely does not expect all the city’s hotels to reopen until July, but said the board is already ramping up its marketing efforts to attract tourists back here. Initially, he anticipates that most visitors will be Californians, who have the ability to travel here in a social-distance-friendly way: their cars.
The tourism board, which is funded by an assessment paid by hotel guests rather than a tax – collected by hotels and voluntarily given to the board to promote tourism – has itself been reeling since the pandemic.
“At the beginning of March, there were 13 of us,” said Kiely. “Now there’s five.”
Kiely hopes to bring those laid off from the board back once business picks up. When will that be? An analysis done by the tourism board projects modest but steady increases in the occupancy rate at West Hollywood hotels over the course of the next 15 months. HVS, a hotel industry consultancy, predicts that in Southern California, the industry will begin to look up in 2021, but will not settle back to 2019 levels for the next four years.
For the city, the costs of the sudden slump in tourism are steep. In the last fiscal year, almost 35% of the city’s sales tax revenue came from the restaurant and hotel industry, according to a report by HdL Companies, an organization that provides revenue management services to government agencies.
City officials are predicting a 15 to 20% reduction in overall revenue in the current fiscal year because of reduced sales taxes and Transient Occupancy Taxes (TOT – a California tax charged in hotels), according to Assistant City Manager David Wilson. In May, the City Council Finance & Budget Subcommittee estimated that the city could suffer TOT revenue losses amounting to $7.5 million, and sales tax revenue losses of $1.6 million due to restaurants, hotels and retail businesses closing down.
Wilson added that the general fund reserve, budgeted at $138 million in the fiscal year 2018 – 2019, could decline by up to $5 million. This fund is held by the city for emergencies, and to fund capital projects, among other things.
What do these revenue losses mean, tangibly, for West Hollywood residents? Not much, said Wilson. The city will scale back on some contracted strategic planning initiatives, like conducting studies, but will continue to provide basic needs and services.
Wilson, who started working for the city shortly before 9/11, has seen West Hollywood rebound from two recessions, “fairly quickly compared to other cities,” and sees some glimmers of hope, even though he acknowledged that the road to recovery this time around will be a longer one.
“The city has been very resilient,” said Wilson. “We have seen crises before, and we made it through.”
Nate Hardesty, general manager at the hotel Andaz West Hollywood, said that between the Chamber of Commerce, the City of West Hollywood and the tourism board, he has been on a conference call at least once a day, getting updates on city and county directives on restrictions and reopening. The hotel, which has been closed since March, is planning on reopening on June 22.
Andaz West Hollywood, part of Hyatt Hotel Corporations, will be reopening into a new normal at the end of this month. Hardesty said that the hotel will implement new cleaning procedures for guest rooms, staff will disinfect public areas repeatedly and be required to wear masks and gloves. It has partnered with the Global Biorisk Advisory Council, and staff at every Hyatt hotel will have to go through a training program on safety, sanitation and health. On June 22, one of the managers will return with a new title: hygiene manager. That person will be responsible for frequent inspections, making sure sanitation stations are constantly refilled, ensuring that guests have personal protective equipment available in public areas, rooms get cleaned, and social distancing is enforced.
La Peer Hotel, which stayed open for a few travelers – mostly medical workers and people visiting family members at a hospital – has become a home for some long-term guests, said Rimedio. One guest, a student from Japan, has been staying at the hotel since almost the beginning of the pandemic, finishing his semester, because his family was uncomfortable with him traveling. Not long ago, he celebrated his 21st birthday at the hotel.
“We knew he liked to DJ, so we got a cake for him, and set up a DJ booth so he could spin some records,” said Rimedio. “You know, trying to take the lemons and make some lemonade.”