From “The James” to the “1”, and now from the “Residences at 8500” condos to the “AKA” hotel.
The ever-evolving Sunset La Cienega Project has taken yet another turn, first reported in the Los Angeles Times, with the sale by developer CIM Group of the Residences at 8500, two eight-story, 190-unit condo towers, to Korman Communities, which plans to turn them into an extended-stay hotel.
Korman also operates the AKA in Beverly Hills, where rooms are available for a minimum one-week stay at a rate of $4,500 a week. It operates another 10 hotels, including five in New York City (one of which is the AKA United Nations), the AKA White House in Washington, D.C., three hotels in Philadelphia and one in London.
The change of the condos into hotel units is likely to raise concerns among owners and managers of the city’s existing hotels because of the likely impact of it and other projects on room rates. It also may concern some WeHo City Council members such as Lauren Meister, who made an unsuccessful push earlier this year for a temporary moratorium on new hotels until the city could do another study of their impact on the local economy. The conversion will require an amendment to the development agreement for the project, which must be approved by the City Council. If the AKA is not designated as a hotel by the city, it cannot legally rent rooms for fewer than 31 days.
The conversion of the Residences at 8500 Sunset from condos to hotel rooms, along with completion of other hotel projects that are under construction, already permitted or are under review, would increase the number of hotel rooms in West Hollywood by 83%
With the recently completed but not yet opened “1” hotel (formerly the James), the city now has 19 hotels with 2,346 hotel rooms. New hotels approved by the city or already under construction such as the Edition and the Kimpton La Peer would add another 447 units. Other planned projects that haven’t received final approval would add 496 rooms, bring the total to 3,575 rooms. Those projects include 8950 Sunset, Robertson Lane and 7811 Santa Monica Blvd.
A study of West Hollywood’s thriving hotel market by CBRE Hotels, an industry consulting firm, has predicted a major impact on room rates if the seven hotels under construction, those permitted but not yet under construction and those in the existing permit process are completed. CBRE projects the current 85% occupancy rate would fall to 68% by 2020. The study predicts that by 2026 that rate will have risen only to 80%.
The hotel room occupancy tax is the largest single source of revenue for the City of West Hollywood. The tax is 15.5%, with 3% of that allocated to the city’s marketing and tourism bureau. The CBRE study found that the projected increase in hotel rooms would not reduce that revenue. The city’s 2016/17 fiscal year budget projects $23 million in hotel tax revenue. The CBRE study estimates that with the new hotels it will reach $36.8 million in the 2020/21 fiscal year.
The conversion of the condo buildings into an extended-stay hotel does address concerns raised by some consultants and hoteliers that the most of city’s hotels don’t offer distinctive features that allow them to appeal to different audiences. With its requirement of a one-week stay, the AKA will address the market for business travelers who plan long stays.