In spite of hurdles getting to 2024, tourism in Newport Beach moving forward appears bright

By GARY SHERWIN

What is it with January? Coming after an indulgent holiday season, it has become the month of resolutions, fresh starts, and good intentions – all admirable things.

It is also the month when pundits come out of the woodwork to tell you what kind of year it is going to be – much like the spooky Madam Leota in The Haunted Mansion.

Oftentimes, these so-called experts know what they are talking about, and others have as much knowledge as perhaps you or me.

So, at the risk of falling into that latter category, here’s my look into the crystal ball of Newport Beach tourism for 2024.

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Courtesy of Visit Newport Beach

Gary Sherwin

You really can’t forecast the year ahead without looking backward a bit. Newport Beach weathered the most challenging period in its history during and immediately after the pandemic. When every meeting in the country gets canceled, and people are sheltering in place for over a year, that is about as bad it gets.

Fortunately, due to the success of the short-term rental market in the city and people’s desire to cocoon with their family pod in homes, along with some strategic marketing, Newport Beach came out of the pandemic in much better shape than many cities.

Understandably, we also had low occupancy in our hotels, but enough people broke out of their isolating homes to venture out, especially people from other parts of Southern California. Couple those folks with first responders who stayed in hotels so as not to possibly infect their families, and you have a “let’s just get through this” strategy.

None of it was pretty, but the last few years have been about rebuilding our visitor markets and catering to people’s changing tastes after a traumatic period that altered many people’s priorities.

Newport Beach as a city also changed during this period. Thanks to the investment of Eagle Four Partners with Lyon Living buying and reinventing the VEA Newport Beach Hotel and then Eagle Four quickly purchasing the former Fashion Island Hotel and reimagining it into the new Pendry Newport Beach, we had two new upscale products that have become game changers.

Both new hotel products are decidedly in the luxury tier category, which means that everyone in town gets elevated. What does that mean? It means that when VEA and Pendry charge a higher rate for their rooms – which they certainly are – that enables our other hotels to do the same. No one wants to be the lowest rate market leader, so when some of the biggest properties in town charge more, another hotel can do the same thing so they can keep parity.

And that’s one of the biggest reasons I’m optimistic about 2024. With the Pendry opening last September, Newport Beach finally has all its hotels open since the pandemic. That means it has been a remarkable three and half years since the city has had every major hotel up and running again (while also collecting valuable Transient Occupancy Taxes).

People are often surprised when I say that while the pandemic was devastating on many fronts, it actually served us positively from a tourism perspective. Certainly, without COVID, Eagle Four wouldn’t have purchased VEA, which wasn’t for sale and probably wouldn’t have been sold by the previous owner. The Irvine Company wouldn’t have shuttered Fashion Island Hotel either and later decided to sell the property.

And there was a national trend during this time to dramatically increase average daily hotel rates, something all our properties in town seized upon. Newport Beach became one of the market leaders in driving rate and in fact we were one of the top cities in Southern California to do so.

Most of the hotels in town decided that they would sacrifice occupancy levels for better-paying guests. In other words, there were fewer people in rooms, but they were open to paying more for it. These are people who cared less about the rate and more about getting out. And the irony is that they weren’t shy about going out to restaurants or shopping at places like Lido Marina Village to spend as well.

When you have fewer guests, there is less overhead like housekeeping and front desk staff as well as less wear and tear on the property.

You can understand why hotels like this approach and are now addicted to higher rates, which they were determined not to let slip. If you want to see a hotel owner go nuts, then lower the rate for an extended period. Lower rates obviously mean lower profits.

Every hotel in Newport Beach has been hiking rates over the last several years, and now that we have fresh luxury products, that trend will only continue.

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The other thing this year that gives me optimism – beyond a pretty strong overall economy – is the resurgence of the meetings industry, the lifeblood of nearly every large hotel in the city.

The benchmark of most major hotels is that if you don’t have at least 60% of your business coming from meetings, you can’t make your revenue goals. Leisure guests are great, but meetings pay the bills.

These meetings have been coming back strong as people desire more face time after too much Zoom time. The challenge is while meetings overall are recovering, they have been smaller in attendance as people become more intentional about which meetings they attend.

That is slowly changing as more people hit the road and even business travel, which people once predicted would be killed off during the pandemic, is resurging. In-person meetings matter, and they are good for business.

So, we have new hotels charging more for their rooms, raising rates across the city, and meetings are coming back, as well as a continually strong leisure market. What’s not to like?

And the big capper is that the New Orleans Saints, in part thanks to the assistance of Visit Newport Beach, have booked VEA for their multi-week summer training this July. They are replacing the L.A. Rams, who spent a few years here, and moved to their new facility in Woodland Hills. That’s more than 5,000 room nights alone.

You can expect someone like me to be optimistic, but in this case, the facts really bear it out. Obviously, there will be unexpected hiccups, and we are facing another contentious election season, which means that anything can happen.

Yet for Newport Beach, I’m still betting on a healthy 2024, and that means an even greater budget surplus for our community.

Gary Sherwin is President & CEO of Visit Newport Beach and Newport Beach & Company.

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