O.C. Resorts Finding a Rich Niche

At the Ritz-Carlton Laguna Niguel, a $525-a-night stay comes with the keys to a Mercedes-Benz, to be relinquished upon checkout, of course.

Over at the renovated Balboa Bay Club in Newport Beach, they’ll pack you a picnic lunch to enjoy while cruising in a Duffy electric boat, if you’re willing to shell out for weekend packages that start at $295 a night.

And the St. Regis Monarch Beach offers perhaps the granddaddy of all amenities: a “surf butler” who checks water temperature and conditions for visitors and helps neophytes ease into the ocean by steadying the board.

Rather than cut rates, posh hotels along Orange County’s coast are turning to lavish packages and imaginative incentives to compete for guests as they aim to fill the more than 1,300 rooms added since 2001.

“It’s about trying to set yourself apart,” said Diana Moody of Honolulu-based Sheila Donnelly & Associates, a firm that specializes in marketing upscale resorts. “It’s not really over the top. It’s added value.”

Consultants who track the habits of wealthy travelers say that, despite the lethargic economy, the affluent plan to spend more this year than last. Already this year, luxury travel revenue is up 12%, compared with 8% industrywide, according to Smith Travel Research.

Coastal resorts in Orange County -- which have emerged as a destination only in the last few years -- have mirrored that revenue trend.

Occupancy rates have climbed 5 percentage points since 2003, to 66.5%, said hotel analyst Bruce Baltin of PKF Consulting. Revenue per available room, a standard industry measure, increased 11.5% over the same period.

That’s better than average for the nation’s 50 largest metropolitan areas, where occupancy rates rose 3.7 percentage points, to 64.7%, and revenue per available room rose 9.5%, PKF figures show.

Baltin’s figures indicate that high-end coastal Orange County resorts are on pace to offer more than 1 million room-nights in 2004, nearly double the figure from 1999. At the same time, the average daily room rate for this year to date is up 3.5% from last year, to $245, he said.

“Business has been fantastic,” said Maggie Feldman, spokeswoman for the 160-room Balboa Bay Club, a venerable private resort that opened its doors to the public last May. “We don’t see all those other rooms as competition so much as compadres helping to draw attention to the area.”

Indeed, hotel managers have begun discussing a regional marketing effort to reintroduce what was once dubbed the “California Riviera” as something more timely. The Riviera image, they say, is stale and old-fashioned.

In the last few years, awareness of the area has surged thanks to construction of new hotels, including the St. Regis, Montage, Balboa Bay Club and Hyatt Huntington Beach.

Glossy photo spreads are popping up in magazines geared toward the rich and trendy. The Montage, for example, has been named among the “Best of the Best Resorts” by the Robb Report and one of the 100 “Hot New Hotels” by Conde Nast Traveler.

“It’s an amazing thing that’s happened there,” said Anastasia Mann, chief executive of Corniche Travel Group West Hollywood and author of the celebrity travel column Star Tracking for orbitz.com. “They’re very hot. They’re very popular.... They were able to create really class-A, five-star destinations. You can go and stay in Montage and not know where you are. You could be in Hawaii.”

Rapid construction of resorts in Orange County has helped develop the area, said Jim Burba, president of Horwath Hospitality Investment Advisors.

“In some cases, more [competition] can be OK,” he said. “It just creates more awareness of the region.”

But construction of new resorts has raised eyebrows among analysts who worried -- particularly after the travel downturn that followed the Sept. 11 terrorist attacks -- that the market could become oversaturated.

That hasn’t happened, in part because hoteliers wisely began focusing on the local market, Burba said. Los Angeles, Orange, Riverside and San Bernardino counties alone represent a population base of 17 million.

“Once things settled down, it shifted people to take close vacations,” Burba said. “I live about a mile from the Montage and a lot of my L.A. friends come down and stay there.”

The challenge for tourists is deciding which five-star hotel to stay in, particularly when many of them boast ocean-view rooms, state-of-the-art spas and fine dining.

Beyond the basic services -- a comfortable bed and a clean room -- fancy hotels are getting elaborate in their efforts to lure the rich.

“Everything else is embellishment to appeal to different niches,” said Ron Kurtz, senior partner with the American Affluence Research Center.

Instead of discounting or price slashing, which Kurtz said upscale hotels hate to advertise, hoteliers are turning to eye-catching incentives.

“When you’re fighting for the market share, it sometimes gets down into doing something strange or silly or not that substantial,” he said. “Something that helps them stand out from the clutter.”

At the Montage in Laguna Beach, guests can bypass the front desk and check in directly at their room, where a complimentary bottle of champagne is awaiting their arrival.

The Hyatt Regency Huntington Beach added a Hawaiian luau to its repertoire. If that’s not enough, there’s the $6,050 three-night package that comes complete with surfboards and wetsuits.

Experts say such gimmicks are good for developing a buzz, but can only go so far in drumming up business. For one thing, the price may be simply too high -- even for travelers in a mood to spend money.

Last spring the St. Regis, for example, had no takers for its ultra-indulgent Valentine’s Day package: A one-night stay complete with surfboard and diamond jewelry to take home -- for $15,000.

But if Anaheim Hills resident Greg Bogart is any indication, the hotel might have better luck next year.

“Get out! I’d have done that,” said Bogart, who instead spent about $4,000 on a romantic Valentine’s Day weekend with his wife at the St. Regis. “Luckily, they didn’t mention it.”

Instead, he settled for rose-petal baths, massages in front of the fireplace, and a butler at his beck and call.

“You didn’t but have to breathe and they’d come and do something for you,” Bogart said. “It’s a wonderful thing to be pampered.”

Whether coastal Orange County’s resort district succeeds or fails in the end will depend on the country’s economic recovery, Burba said. And right now, that recovery is uncertain.

From month to month, “the numbers are up, the numbers are down. We’re happy, we’re sad,” Burba said.

He’s encouraged, however, by a survey his company recently conducted of prospective hotel investors. More than half forecast revenue growth in their companies, Burba said.

“I would guess that 2005, barring the unforeseeable, is going to be a pretty good year.”