Amid Gradual LA Convention Center Rebound, Downtown Los Angeles Hotels Holding Their Own

Last month's sudden cancellation of the E3 conference, a stalwart of the Los Angeles convention scene, is the latest setback the city's hospitality industry has experienced, but local hoteliers say the market is creeping back despite a raft of challenges.

The cancellation came amid an ongoing recovery of convention center traffic, an important generator of hotel room bookings Downtown that one hotel manager estimated made up about 10% of his business prior to the coronavirus pandemic.

“The relationship between conventions and Downtown hotels is a very symbiotic relationship,” said Mitchell Hochberg, president of Lightstone, the developer of the AC and Moxy hotels across the street from the center. “The conventions need the hotels and the hotels need the conventions.”

Pre-pandemic, the convention center could be expected to hold between 20 and 30 large events per year that generated hundreds of thousands of booked room nights. While those numbers haven’t been reached yet, current trends and a major expansion for the venue on the horizon have both convention officials and nearby hotels optimistic about what lies ahead.

March numbers from the Los Angeles Tourism & Convention Board show, on average in the first three months of 2017 to 2019, the convention center produced just under 229,000 booked room nights for LA hotels. In the same period this year, the convention center produced about 177,000 booked room nights — up from roughly 167,000 in the same period in 2022 but well below pre-pandemic levels. 

Though it’s hard to say what percentage of those rooms were booked at Downtown hotels, because of their proximity to the convention center facilities, Downtown hotels do see a definite boost from convention events.

Javier Cano, area general manager for the L.A. Live hotel properties — the J.W. Marriott LA Live, the Ritz-Carlton and Ritz-Carlton Residences — as well as the Sheraton in Downtown LA, said that, when there is an event, the convention center “easily” accounts for about 75% of bookings at the L.A. Live hotels, which have about 1,000 rooms combined.

Cano anticipated that it would be at least another year or two before the convention center’s business and the benefits it generates for nearby hotels returns to pre-pandemic levels. In the meantime, his staff is working to generate more bookings on their own, especially from groups, he said.

At the InterContinental Los Angeles Downtown, the convention center accounted for about 10% of the 900-room hotel’s business prior to the pandemic, General Manager Niles Harris said. 

"The convention center is a major demand generator," Harris said. 

At the recently opened AC and Moxy hotels across the street from the convention center, proximity to the venue meant having a powerhouse first month. 

Lightstone’s 37-story, dual-branded hotel project containing a 380-room Moxy Hotel and a 347-room AC Hotel was completely booked in its first week for an American Association of Neurological Surgeons event at the convention center, Hochberg said. 

“Four days after we opened, the hotel was sold out for three days for a convention,” Hochberg said. “That was very encouraging.”

This week, a convention held by the National Council For Mental Health has filled up the hotel again. 

The cancellation of E3, an event that all hoteliers and city tourism officials described as among one of the city's biggest events, was not something that could be quickly backfilled with a similarly sized event, as the large-scale events that draw out-of-towners and fill up hotel rooms are planned years in advance. 

Looking toward the next two years, the convention center has booked 17 events for 2024 and 15 events for 2025, which will generate more than about 225,000 room bookings per year.

Hochberg said, from his perspective, 2024 and 2025 seem like they will be strong years in terms of convention-generated bookings, and he expects incremental gains with each passing year. While he knows that business source is still bouncing back from the pandemic, he was confident that it would improve with time. 

“It's certainly on the right trajectory, but it may be a year or two longer than we originally anticipated,” Hochberg said. 

Downtown hotels aren’t just contending with a rebounding convention center. Nationally, hotels in the downtowns of many major cities aren’t seeing the return of business travel. The continued droop mirrors the lag in urban office occupancy, CoStar reported.

But as dire as that might seem for Los Angeles’ Downtown hotels, recent numbers from STR indicate that the gap between pre-pandemic room rates and occupancy isn’t that large. 

Occupancy in Downtown LA in 2019 averaged 77% with an average daily rate of $182 and revenue per available room at $140. For 2022, occupancy was down, 66.8%, but the average daily rate was just over $189 — more than 2019’s numbers — and RevPAR was about $126, about 10% off 2019’s figure. 

This year so far, occupancy is still around 66% but the average daily rate is $191. RevPAR was still around $126. 

In some cities, such as the downtowns or CBDs of San Diego or Phoenix, numbers for the same period surpassed 2019’s totals, said JLL Managing Director James Stockdale, who is on the investment sales team of JLL’s Hotels and Hospitality Group.

“This phenomenon of higher rates now than pre-Covid is not just a Downtown phenomenon, it's pretty much everywhere throughout LA,” Stockdale said, so for travelers who don’t want to pay the high rates of a Westside hotel, “Downtown can be a good alternative, depending on what you're trying to do. I think that's one thing that is helpful for the [Downtown] market.”

Another thing that could potentially be helpful for the Downtown hotel market is a major investment in the convention center: a long-awaited expansion of the facility that convention center officials say will help the venue attract bigger conventions — events that it can’t court now because it doesn’t have enough contiguous space.

The public-private partnership project with AEG, which includes the simultaneous expansion of the J.W. Marriott hotel complex that will contain more than 1,000 rooms, is as little as one city council vote away from full approval, Chief Tourism Officer Doane Liu said.

The expansion of the center and the addition of more hotels are critical to competing with other cities' convention centers. 

“Our relationships with the hotels is, we rely on them because we need to have those hotel rooms in order to attract the large conventions,” Liu said. “The ecosystem of the convention world is such that when they choose a destination or a city, it's much, much more than just the convention center or the hotels. They look at everything as a whole."