Filed under: Company News, Market News, Investing
Los Angeles County’s fabled Sunset Strip — home to numerous legendary nightclubs — is going corporate. Goodbye, Rat Pack and Guns N’ Roses; hello, Marriott International (MAR).
Gangsters and Guitarists
Through a quirk of urban planning, the Strip — a 1.6-mile stretch of Sunset Boulevard — was part of unincorporated land within Los Angeles city limits (these days, it belongs to the micro-city of West Hollywood).
As such, it was overseen not by the L.A. Police Department, but by the more lax County Sheriff’s department. Entrepreneurs took advantage of this, and in the early 20th century the Strip soon became the hottest entertainment destination in the L.A. area, home to clubs, bars and the occasional house of ill repute.
In the 1940s and 1950s its nightclubs frequently hosted the top stars of the era. Many a band across the subsequent decades rose to prominence playing joints like The Roxy, Whisky A Go Go (still going strong at 50), and the Viper Room.
Throughout the world, the Strip was nearly synonymous with nightlife. So much so that, according to some, its name was cribbed by the burgeoning city of Las Vegas to title the strategic section of its main thoroughfare. For many years now, the heart of Las Vegas Boulevard has been known simply as “The Strip.”
The City That Sometimes Sleeps
The Strip is not the only game in town for visitors. Close by is the gay mecca of West Hollywood’s “Boy’s Town” neighborhood, while the tiny city’s location in the kernel of L.A. makes it the perfect springboard for visiting Hollywood, L.A.’s beaches, and the neighboring Beverly Hills.
Tourism is big business for West Hollywood. Twenty percent of the municipality’s fiscal 2013 take came from the transient occupancy (i.e., lodging) taxes levied on those visitors. This brought in a cool $18 million that year — 18 percent higher year over year, by the way — making it WeHo’s No. 2 revenue source.
And there’s more where that came from. Last year, West Hollywood hotels collectively had an occupancy rate of 82 percent, according to industry watcher STR. This is much higher than the 2013 national figure of 62 percent, as calculated by the American Hotel & Lodging Association — indicating that there’s plenty of room for growth.
Here Come the Hoteliers
So it’s no surprise to learn that some big names in the sector are very interested in West Hollywood, and where better to build than its famous street?
A host of hotel projects on the Strip are in various stages of development. Developer CIM Group has cleared a pair of parcels on either side of the intersection of busy La Cienega Boulevard and the Strip. One is to be home to the 286-room four-star James Los Angeles hotel, comprised of a pair of 10-story towers. The other parcel will be the site of residential buildings.
Meanwhile, across the street from The Roxy, the sun will rise on an Edition Hotel, Marriott International’s boutique brand. The company plans to construct an Edition boasting nearly 200 rooms, which should open in 2017.
Marriott has partnered with industry veteran Ian Schrager on the Edition line. Schrager is a co-founder of Morgans Hotel Group (MHGC), and that company’s flagship Southern California property is the Strip’s Mondrian Hotel.
The Last Encore?
The wave of hotels threatens to obliterate the Strip’s smaller businesses, which include some places that give the stretch its character and reputation.
According to Bloomberg, a division of engineering company AECOM Technology (ACM) is aiming to build a complex on the eastern end of the Strip anchored by a 149-room hotel. At the moment, that land is occupied by the local iteration of Live Nation’s (LYV) House of Blues concert hall chain. According to a spokesman for the club, it is finding a new location.
The building itself will probably suffer the fate of the Strip’s first theater, the nearly 50-year old Tiffany. That venue was razed by CIM Group last year to make way for its La Cienega project.
That seems to be the trajectory of the neighborhood — fun stuff out, lodgings in. Across the street from Whisky A Go Go lies the Hustler Store, the main retail outlet of the notorious porn empire. Like House of Blues, it’s packing up and moving elsewhere.
In the Bloomberg article, a West Hollywood Community Development Department official speculated on what the future of the building could be. It might, he mused, be torn down to be replaced by — yep — a new hotel project.
Motley Fool contributor Eric Volkman has no position in any stocks mentioned. Nor does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. Check out our free report on high-yielding dividend stocks.
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Source: Investing
