Mayor Meister Calls for a Moratorium on New WeHo Hotel Construction

Mayor Lauren Meister will ask the West Hollywood City Council on Monday to declare a moratorium on the development of new hotels in WeHo until the city can conduct a new study on their impact on the existing hotel market.

In her proposal, Meister notes that last September the Council was given an analysis of the WeHo hotel market that projected a major decline in hotel occupancy and in the rate per hotel room if the city grants permits to hotel projects currently under review on top of those that already under construction or that already have been approved for construction. Yet, she said in an interview with WEHOville, the Council simply “received and filed” the analysis without acting on it.

A 2008 rendering of the proposed La Peer Hotel by architects Moule & Polyzoides.

The analysis, by PFK Consulting and CBRE Hotels, noted that WeHo hotel projects under review, under consideration and already approved for construction would add 1,229 rooms to the city’s current 2,060 hotel rooms, an increase of 60%. The study projected that by 2020 the hotel room occupancy rate would fall to 68% from the rate of 83% in 2015. It also said that the average daily room rate would fall to $243 from an average of $279 if both hotels that have been permitted but aren’t yet under construction and those that are under review but not yet permitted actually are built.

An analysis of the PFK/CBRE study by the Atlas Hospitality Group, a hotel financing and advisory group, reported that the additional hotels would “cannibalize the market.” In her presentation to the Council, Meister notes that the study said it would take until 2026 for the city’s hotels to return to the 80% occupancy rate. In recent times the existing hotels have been at that rate or higher.

Meister also said that four projects under consideration were not included in the PFK study. They would add an additional 443 rooms, increasing the supply of hotel rooms by 80%. In an interview with WEhoville, Meister said the study also didn’t consider the impact of two major hotel projects under construction next door in Beverly Hills.

marriott edition, sunset boulevard hotel
Illustration of the Sunset Boulevard entrance to the Marriott Edition hotel

Meister is asking the Council to consider implementing policies, based on her proposed new study, that would promote diversification in the local hotel market. For example, she noted, there is no WeHo hotel that contains major conference space, which would give it an edge among some business and organization travelers.

Other factors that should be considered, Meister said, are the impact of the strength of the U.S. dollar and of foreign opposition to the Trump administration. There have been numerous calls for a ban on travel to the United States because of Trump’s policies and news articles documenting the impact of those calls. She also is asking the City Council to consider the impact of new hotels on water usage.

Meister proposes that the city consider ways to diversify its economy, which is heavily dependent on tourism. “If there is another recession we need to know where our revenue is coming from,” she said.

Meister’s request may put her in opposition to City Hall, which has seen new hotels as one way to boost the slow growth in the city’s General Fund revenue.

In a report to the City Council last month, City Manager Paul Arevalo and the city’s Finance & Technology Services Department said the annual growth rate of the city’s overall General Fund revenue was only 2% in the first half of this fiscal year. The report attributed that low rate not to a slowdown in the local economy but to the fact that some of the city’s main sources of revenue are at or near capacity.

Rendering of the Robertson Lane Hotel swimming pool. (Architect Hodgetts + Fung)

The hotel room occupancy tax, which is the city’s largest single source of General Fund revenue, did do better than the average. Hotel tax revenue was up 7% to a total of $11.3 million as of Dec. 31, 2016, the middle of the city’s fiscal year.

Arevalo’s report noted that hotel room occupancy rates recently have been in the high 80 percentiles and that average daily room rates are above $300 a night. It also noted that many of the city’s bars and restaurants are at capacity.

“With this in mind,” the report said, “any significant revenue growth will likely be generated by new sources.”

Among those sources, the report said, are the James Hotel, expected to open in May with 286 rooms; the Kimpton La Peer, which will open this Summer with 105 rooms, and the Marriott Edition, which will open in Spring of next year with 190 rooms.

The hotel projects for which official environmental impact studies are underway but that are not under construction are the Arts Club at 8920 Sunset Blvd. (15 rooms) Faring Capital’s proposed Robertson Lane project (251 rooms) and proposed Orange Grove and Santa Monica Boulevard project (78 rooms), and a project proposed for 8950 Sunset Blvd. between Hammond and Hilldale (165 rooms). An internet search shows the 8950 Sunset Blvd. project is associated with Mohamed Al-Marri of Studio City.

The proposed hotels that are either under initial review or expected to be submitted for review are the Perry, another Faring project, at 8816 Beverly Blvd. (130 rooms), an unnamed project proposed for 9034 Sunset Blvd. (185 rooms) and a hotel proposed for the current site of Barney’s Beanery at 8447-8457 Santa Monica Blvd. (113 rooms).

Meister’s proposal cites the Atlas Hospitality Group’s prediction that construction of all hotels under consideration might mean a decrease in the hotel room occupancy tax of $1 million in 2020 and 2021, given the downward pressure it would put on hotel room rates. Meister said she recently has met with management of five or six existing local hotels, who she said are not happy about the growth in competition.

The City Council will consider Meister’s proposal at its meeting on April 3 at 6:30 p.m. at the City Council Chambers, 625 N. San Vicente Blvd. south of Santa Monica.


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Arlene
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Arlene

Does anyone know how many apartment buildings have been turned into hotels? Le Parc? If they build too many we will have our housing problems solved…..turn them (back) into apartments. Also, all the Meister haters remind me of the Hillary haters…..what you get is more Trump. Let’s stop all the hating… It’s not very progressive and we are the progressive city, right?

Ellen T.
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Ellen T.

I’m sure the townscape three will be voting against this proposal. Since they are totally in the hands of Developers. As for West Hollywood, I can’t imagine anybody spending more than two days here. There is nothing to do. It is rather tacky and mediocre-at-best. Anyone with money, would be heading out to Santa Monica or the beach so you could at least have some kind of fresh air and the ocean. In Paris you can get a hotel for 300 to 400 a night, that is five stars. Far superior to the Chateau Marmont or the Mondrian. Besides anyone… Read more »

Mike Dolan
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Mike Dolan

There are only two ways of dealing with [hotel costs]. We must go fourth with planned and in-the-pipe-line building of all types of hotels.

You can try to make West Hollywood less desirable, or you can accommodate hotel room demand, which must mean more building.

A moratorium on the hotel market is unproductive and acts like a panacea when the demand for additional hotel room should be allowed to happen organically. The challenge in building future hotel’s, some rooms must also accommodate affordable rates.

Mark
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Mark

WEHO should allow unlimited hotel rooms especially if they are pet friendly. What we shouldn’t allow are more Jay Luchs for rent signs up and down every major street. If developers can’t rent out space within 30-45 days they shouldn’t build them. If it takes more than 45 days then they need to remove their signs or have a small for rent sign in the window. Otherwise it encourages developers to build build build and charge too much rent where businesses can’t afford it and they go broke. Just look up and down Melrose where every other store front has… Read more »

JJ
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JJ

Larry, I haven’t voted for you in the past, but I might if you run again. =) You’re last comment was spot on.

Larry Block
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Larry Block

Let the free market decide the price of the hotel room. It appears from some comments that want to talk about the ‘report will cannabilize’ other hotels.. well that’s not your freakin business. Do we stop allowing restaurants because they cannabilize other restaurants? Clothing stores? Bars? Who is Meister to decide that there are too many? West Hollywood is one small dot in Los Angeles- and adopting or proposing these restrictive ideas is why West Hollywood has a bad for business reputation and why Lauren is a bad for business council person. And to those who think that some are… Read more »

Rob Bergstein
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Rob Bergstein

The Eastside of West Hollywood is still in desperate need of a hotel. When my parents used to visit, there was then (and now) no hotel for them to stay at in West Hollywood’s Eastside. And with Oprah OWN to The Lot, it would be great if her traveling executives had a hotel in the area to stay in…..

Steve Martin
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Steve Martin

Thanks Don. Apparently there are a lot of critics who are not aware that the City Council commissioned a study regarding the impact of building future hotels on the City’s finances and on the hotel business in general. The report said that we are coming very close to cannibalizing our existing hotels as we could be looking at a future glut of rooms if we keep approving new hotels. The study discussed the upsides and downsides of restricting future hotel growth in the City. The idea of a moratorium as floated as a way to put the brakes on hotel… Read more »

Rick Bye
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Rick Bye

Beverly Hills has around 2,600 luxury hotel rooms and will have close to 3,000 when the Waldorf and Wanda Hotels are done. WEHO rates are around half of what BH gets, so WEHO could easily have 4,000-5,000 rooms without any issues, especially since there is more demand in $300 a night range vs $600 a night in BH. If WEHO wants to keep a high level of City services and expand others it needs more hotel rooms to pay for it.

Mark
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Mark

WEHO should approve another 10,000-12,000 hotel rooms so we can drive the price down to under $100/night for 4 star hotels. I also think their idea of building a huge hotel and industrial complex at the corner of Santa Monica Blvd and San Vicente seems sound. Having the additional mega office towers will help drive down the price of office space in WEHO.

Don Jones
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Don Jones

Ok all you negative trolls, I read the item that will be going before the city council. If you had done the same before you spewed your misinformation you’d might see what the proposed moratorium is all about.

The city hired two separate consultants who both agreed that the additional hotel competition “would cannibalize the market” and “lower transient occupancy taxes (“TOT”), with an approximate $1 million decrease”.

Since the TOT represents a quarter of the city’s revenue, then I agree the council needs to evaluate.

Mike
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Mike

A hotel on SMB at Orange Grove??

George Hirst
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A city as small as WeHo has way to much development. It is already a traffic nightmare which has ONLY worsened over the years. I feel sorry for people who live there as these council member ONLY seem concerned about turning West Hollywood into a gay Disneyland or adult Las Vegas.

Shawn Thompson
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Shawn Thompson

Good move to stop the city from being a we hotel. To west Hollywood that is rooted in rent control, gay right, diversity, afordable housing and was once an urban village, before the campaing money flowed in and was manifested into new zonning laws that allowed forced denisty