A Wave of Southern California Hotel Closures Expected as LA Tourism Diminishes

As LA’s first hotel closes permanently due to COVID-19, hospitality experts warn that many others could follow. For 27 years, the Luxe Rodeo Drive hotel kept a prime spot on Beverly Hills’s famous street before closing this month.

With reduced room occupancy from a massive tourism slowdown and canceled conferences, hotels have had issues making their loan payments. Hotels have tried to stave off closure by laying off workers, but even that may not be enough.

As with most businesses, Luxe’s owners were caught off guard by coronavirus. The Harkham family — who also owns the property — blamed COVID-19 and bad timing after embarking on a full remodel right before the pandemic struck in March. The Harkhams will consider new options for the prime property, according to the Los Angeles Times.

The Times story also quoted a number of hotel industry experts who believe this is the beginning of a wave of closures. Hotel Association of Los Angeles executive director Heather Rozman cited data that shows one in four hotels are struggling or unable to pay their mortgages.

In the Southern California region, the data firm Trepp found that 60 hotels in Los Angeles and Orange County are over 30 days delinquent on their loans. While this data paints a grim picture, some hotels in the region are reporting occupancy rates as high as 80 percent. Another silver lining is there’s been an uptick in visitors traveling to Southern California by car, particularly for hotels in Santa Monica, Santa Barbara, and San Diego, where occupancy rates remain steady.

Donald Wise, co-founder and senior managing director at Turnbull Capital Group, said many hotels were also recipients of funding from the Paycheck Protection Program, while some banks have forgiven loan delinquencies over the last few months.

Tourism typically brings 50 million visitors to LA annually, but the coronavirus pandemic has resulted in 22 million fewer visitors this year, according to the Los Angeles Times. It’s estimated that the loss of tourist spending throughout the city is more than $13 billion.

• ‘Tsunami’ of hotel closures is coming, experts warn [LAT]