Millbrae's hotels see slight occupancy rise

By Gregory Benchwick


After another year of below average hotel occupancy, Millbrae hoteliers are pointing toward positive growth in 2004.

Hotel occupancy will be better than 2003, but not as high as it should be, say hotel operators, leaving councilmembers scratching their heads in search of new revenue streams.

Hotel taxes, also known as the transit occupancy tax, comprise about 50 percent of Millbrae's annual revenues. The drop in hotel occupancy has drastically affected Millbrae's already teetering budget, which currently projects annual $2 million deficits for the upcoming five years. The loss of this primary revenue stream forced the council to cut the city's budget "to the bone" and, more recently, to seek revenue-generating measures, such as a half-percent sales tax increase and a special fire-assessment district.

"Millbrae is a bedroom community, and our hotel tax is very clearly something we're very dependent on, which historically has not been a bad bet," said Councilmember Linda Larson. "The hotel tax is a double-edged sword, because some it of it depends on tourism and the majority of it depends on the business trade."

The Sept. 11, 2001 terrorist attacks, a waning economy and airline bankruptcy combined to chop Millbrae's hotel occupancy rate from standard levels of 80 to 90 percent to an abysmal 50 percent. Earlier projections said the industry would bounce back in two or three years, but with the nation currently on high alert and the economy continuing to lag, experts predict the hotel industry recovery will be slower than predicted, with only 5 percent projected annual growth in Millbrae.

Even a slow rise in hotel occupancy does not necessarily mean Millbrae will enjoy more transit occupancy tax, as room rates are very low, say hotel owners.

One of the largest hurdles facing the industry is the lack of business travelers, which traditionally comprise nearly 50 percent of the area's hotel occupancy.

"Business travel is down significantly -- it used to make up a great deal of our business. But since the dot-com bust, business travel is down significantly, as most businesses, trying to cut costs, are not having their employees travel as much as before," said Barry Ongerth, owner of the San Francisco Airport Travel Lodge, which is located on El Camino Real in Millbrae. Business travelers now only comprise about 20 percent of the occupancy at Ongerth's hotel.

According to Anne LeClair, president of the San Mateo County Convention and Visitors Bureau, groups of business travelers coming into the Bay Area for conventions and expos are on the rise, while there is a shortage of individual business travelers.

People from the Visitors Bureau and local hoteliers are pounding the pavement to entice more vacationers and travelers to stay in San Mateo County.

"We have six sales managers who do about 50 trade shows all around the U.S.," said LeClair. "Once a planner sees our area, the planner loves it. The key is to show that we are not a traditional airport location, that we are really like a resort."

While local hotels are pressing hard to bring in more business, the state is doing little to bring travelers into California, according to LeClair.

"We're looking to promote our business more within California, because people are traveling closer to home," Ongerth said.

Copyright ©2004 East Bay Business Times. Published 01/09/2004.