Hotel Market Study Downtown Los Angeles Supporting the Los Angeles Convention Center

HOTEL MARKET STUDY DOWNTOWN LOS ANGELES SUPPORTING THE LOS ANGELES CONVENTION CENTER 2017 FULL REPORT AVAILABLE AT WWW.JOSEHUIZAR.COM/2017_DTLA_HOTEL_MARKET_STUDY INDEX OF EXHIBITS EXECUTIVE SUMMARY . 1, 2 RECOMMENDATIONS PROXIMITY . 23 BACKGROUND RATINGS . .24 RECORD-BREAKING VISITATION. .3 MEETING SPACE . 24 TRANSIENT OCCUPANCY TAX GROWTH . 4 TOOLS . 25 CITY OF LA LODGING METRICS . 5 INFRASTRUCTURE . 25 LACC PERFORMANCE . 6 CONVENTION CENTER COMPARISON . 7 CONCLUSION . 26 ANALYSIS HOTEL SUPPLY IN COMPARABLE CITIES . 8 WEST COAST CITY HOTEL ROOMS BY DISTANCE . 9 WEST COAST CITY HOTEL ROOMS BY RATING. 10, 11 HOTEL MEETING SPACE IN COMPARABLE CITIES . 12 EXISTING HOTELS WITH 3/4 MILE OF LACC . 13 THE AREA’s neWEST HOTELS . 14 MAP OF EXISTING HOTELS. 15 HOTELS UNDER CONSTRUCTION . 16 MAP OF EXISTING AND UNDER CONSTRUCTION HOTELS . 17 COMMISSIONED BY: PROPOSED HOTELS. 18 COUNCILMEMBER JOSÉ HUIZAR PROPOSED HOTEL HIGHLIGHTS. 19, 20 MAP OF EXISTING, UNDER CONSTRUCTION, AND PROPOSED HOTELS . 21 PREPARED BY: NEW HOTEL ABSORPTION. 22 ROBERt r. “bud” ovrOM EXECUTIVE SUMMARY Downtown Los Angeles is booming! And probably no development has been a bigger ‘spark plug’ for that boom than the Sports and Entertainment District in South Park, with the Staples Center, the Microsoft Theater, the reinvigorated Convention Center, LA Live and the surrounding hotels and residential/retail development. The continued growth of that prosperity will be even further enhanced with additional hotel rooms. This report highlights that Los Angeles has doubled the number hotel rooms within walking distance of its Convention Center in just the last four years, from about 2,500 rooms to more than 5,000. And, there is every indication the District can support even more. Tourism and the Leisure and Hospitality Sector are often overlooked or “taken for granted” in Los Angeles, eclipsed by higher profile industries such as entertainment and high tech. In fact, Leisure and Hospitality is one of the fastest growing sectors in our local economy. Visitation increased almost 23%, from 38.5 million visitors in 2010 to 47.3 million in 2016 – and is ahead of the trajectory needed to reach the City’s goal of 50 million visitors by 2020. The Transient Occupancy Tax (TOT) charged to hotel guests was the seventh largest General Fund revenue source in Fiscal Year 2014-15, and had the highest year-over-year percentage growth, reaching a record breaking $248.5 million in 2016, up 13.9% from 2015. In 2016, City of Los Angeles hotels saw double-digit percentage increases in both Average Daily Rate (ADR) and Revenue Per Available Room (RevPAR) and their occupancy rates averaged more than 80% for the third consecutive year! Among the top 25 U.S. markets, the Los Angeles market had the highest year-over-year RevPAR growth (the most important lodging metric) at 10.56% for 2016. That high level of economic growth will be enhanced with even more hotels, starting with the Sports and Entertainment District in downtown. 1 EXECUTIVE SUMMARY (cont.) In 2013, with only 2,597 hotel rooms in the targeted area, the Convention and Tourism Development Department set what seemed like an implausible benchmark of 8,000 hotel rooms open or under construction within walking distance of the Convention Center by 2020. Today, that goal is clearly within reach! With 4,637 rooms now open and another 717 currently under construction, the District will soon have 5,354 hotel rooms - over twice as many as existed when the goal was set in 2013 – and 67% of the way to 8,000. This report will also itemize an additional 10 hotels, totaling 4,434 rooms, which have been proposed and accepted by the Planning Department. IF all of these proposed hotels were built, the original goal would actually be exceeded, with a total of 9,788 rooms. Given the nature and economics of development proposals, not all these hotels will be constructed, but it does demonstrate considerable interest in hotel development in the District and a high level of confidence that the goal of8,000 rooms can and will be reached. Although 8,000 hotel rooms will still be less than the City’s major competitors, it is probably the most the market can realistically absorb by 2020. Moreover, it is a stunning achievement compared to where the District was just four years ago! The exciting success of the Convention Center and the surrounding sports and entertainment venues should not be taken for granted, and the City and private sector cannot be allowed to rest on their laurels. When it comes to remaining competitive with other convention center cities, the status quo never lasts – every day, every market is either getting stronger or weaker. With continued public and private-sector leadership and diligence, Downtown Los Angeles’ best days as a competitive, vibrant and dynamic Convention Center City lie ahead! 2 BACKGROUND RECORD-BREAKING VISITATION VISITORS TO LOS ANGELES COUNTY BY CALENDAR YEAR 50M 3.8% 3.1% 45M YOY % INCREASE 4.8% 2.0% 2.5% 4.9% 47.3M 45.6M 40M 44.2M 41.4M 42.2M 40.4M 38.5M TOTAL VISITORS IN MILLIONS VISITORS TOTAL 35M 2010 2011 2012 2013 2014 2015 2016 CALENDAR YEAR • Los Angeles County welcomed 47.3 million visitors in 2016, the sixth consecutive year of record-breaking visitation. • The City is well on its way to achieving its goal of 50 million visitors by 2020 (and probably sooner!). • Tourism is among the largest and healthiest contributors to the LA economy, bringing in $29.9 billion in direct spending and $33.6 billion in economic impact in 2016. SOURCE: CTD, LATCB 3 TRANSIENT OCCUPANCY TAX GROWTH TOT GENERAL FUND RECEIPTS COLLECTED BY CALENDAR YEAR 13.9% $250M 15.1% YOY % INCREASE $200M 4.5% 14.4% $248.5M 10.7% $218.2M 14.9% $150M $189.5M $181.3M TOT IN MILLIONS TOT $158.5M $143.2M $124.6M $100M 2010 2011 2012 2013 2014 2015 2016 CALENDAR YEAR • Transient Occupancy Tax (TOT) reached a record breaking $248.5 million in 2016, up 13.9% over 2015. • TOT was the seventh largest top General Fund revenue source in Fiscal Year 2014-15, and had the highest year over year percentage growth. SOURCE: CTD, OFFICE OF FINANCE 4 CITY OF LOS ANGELES LODGING METRICS AVERAGE OCCUPANCY RATE BY CALENDAR YEAR AVERAGE DAILY RATE BY CALENDAR YEAR 85% 1.8% $200 1.6% 0.2% 11.0% 2.3% 80% $175 8.4% 82.2 7.5% 75% 80.6 80.8 $150 3.3% 181.13 79.3 160.13 77.5 150.48 DAILY RATE IN $ RATE DAILY 135.42 139.94 OCCUPANCY RATE OCCUPANCY 70% $125 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 CALENDAR YEAR CALENDAR YEAR ROOM NIGHTS SOLD BY CALENDAR YEAR AVERAGE REVENUE PER AVAILABLE ROOM BY CALENDAR YEAR 13.0% 11.5M 1.8% $150 1.4% 8.8% 4.5% 11.0M $125 9.2% 5.7% 11.38M 148.96 1.2% 11.17M 10.5M 11.02M $100 131.85 110.97 121.22 10.43M 10.55M IN $ REVPAR 105.00 10.0M $75 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 CALENDAR YEAR CALENDAR YEAR ROOM NIGHTS IN MILLIONS • City of Los Angeles hotels had a great year in 2016, with double-digit percent increases in both average daily rate (ADR) and revenue per available room (RevPAR), and the occupancy rate averaged above 80% for the third consecutive year. • Among the top 25 U.S. markets, Los Angeles County had the highest year-over-year RevPAR growth (the most important lodging metric), with 10.8% in 2016. SOURCE: CTD, LATCB 5 LACC PERFORMANCE LACC EXHIBIT HALL OCCUPANCY RATE LACC ECONOMIC IMPACT 80% $600M 60% $400M 40% 72% $562.8M 65% 57% 60% $200M $410.8M 20% AVERAGE OCCUPANCY RATE OCCUPANCY AVERAGE DIRECT & INDIRECT SPENDING & INDIRECT DIRECT 0% $0M FY13 FY14 FY15 FY16 FY15 FY16 FISCAL YEAR FISCAL YEAR • The Los Angeles Convention Center (LACC) is performing better today than at any time in its history. • The LACC Exhibit Halls maintained an average occupancy of 72% during Fiscal Year 2015-16, 10.8% higher than the prior year. By industry standards, the “practical maximum” is 70%. • As a result, the LACC has earned operational profits (revenues over expenditures) of approximately 18$ million in the first3.5 years of the P3 contract. • During FY16, the LACC generated an estimated $562.8 million in economic impact, 37% higher than FY15. SOURCE: CTD, LACC, LATCB 6 CONVENTION CENTER COMPARISON CALENDAR YEAR 2014 LOS ANGELES SAN FRANCISCO ANAHEIM SAN DIEGO CITYWIDE EVENTS 26 59 64 76 ROOM NIGHTS SOLD 197,037 1,018,422 471,256 673,955 AVG ROOM NIGHTS/EVENT 7,578 17,261 7,363 8,868 • Despite performing better than ever before, the LACC still has a significantly lesser economic impact when compared to the other major convention centers in California. • The San Diego Convention Center, which is smaller than the LACC, attracts nearly three times as many major conventions than the LACC, which results in over three times as many room nights sold. • San Francisco sells over five times as many room nights as LA, because they are booking bigger and better conventions, with over twice as many room nights per event. • One of the primary reasons the LACC does not attract more major conventions is the significant lack of hotel rooms. SOURCE: CTD, LATCB 7 ANALYSIS HOTEL ROOM SUPPLY IN COMPARABLE CITIES HOTEL ROOMS CONVENTION CENTER WITHIN 3/4 MILE This Hotel Market Study focuses on the Sports and 1 SAN FRANCISCO 21,570 Entertainment District of Downtown Los Angeles (DTLA), 2 NEW YORK 15,370 centered around the Los Angeles Convention Center, Staples 3 ANAHEIM 13,400 Center, Microsoft Theater and LA Live.

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