Anaheim lures hotel developers through tax incentives

Disneyland

Developers in Anaheim, Calif., may be getting tax incentives reimbursing them on $560 million in hotel developments in the city's resort district. Three hotels are the subject of these incentives, once of which is located at Disneyland.  

The City Council will vote Tuesday regarding the tax breaks, and those in favor say the luxury hotels will attract higher-end visitors and conventions to the city, which currently has average daily rates of $300. This would generate double the tax revenue collected from lower-end properties while creating 2,000 jobs. 

However, some are reluctant to back the deal, and are unsure if the city's market is strong enough to support the luxury hotels, and if the incentives are even necessary to bring developers in. 

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Last year the City Council approved a policy to encourage the construction of hotels that meet AAA's four-diamond rating by way of reimbursing developers for 20 years 70 percent of the transient occupancy tax collected from guests each stay. Anaheim's occupancy tax sits at 15 percent, and after the 20 years are up the city would pocket the bed tax revenue and use it to pay off bonds from investments into the city's resort district in 1996, as well as covering operating expenses and community programs. Estimates show the three hotels generating $300 million in revenue after passing developers the incentives over 20 years, and once Anaheim begins collecting on the taxes in full the city is projecting $613 million in revenue over 10 years. 

The hotels in question include a 700-room luxury hotel and parking structure proposed by Disney at 1401 Disneyland Drive, which will start construction in 2018 and open in 2021; a $580-million, 580-room hotel proposed by Good Hope International at 1700 S. Harbor Blvd which would replace the existing Anaheim Plaza Hotel & Suites; and a $225-million, 700-room hotel proposed by FJS Inc., which would replace the existing Anabella Hotel near the Anaheim Convention Center. 

In part of the plan, the Anaheim Plaza Hotel & Suites would be removed to make way for a luxury 580-room hotel.
In part of the plan, the Anaheim Plaza Hotel & Suites would be removed to make way for a luxury 580-room hotel.

According to John Woodhead, Anaheim's community development director, the city is capable of supporting at least 2,500 luxury rooms. "Each year, we are losing more than 100,000 visitors,” Woodhead said in a statement. The figures he cited came from a study from tourism bureau Visit Anaheim. “Many of them are the high-end clientele and conventioners. We’re losing them to the coast and the danger is we’re also losing them to Los Angeles. L.A. has a nice four-diamond market built around the Staples Center and their convention center.” 

Alan X. Reay, president of the Atlas Hospitality Group, is in opposition of the plan. He claims that now is the time for developers to build hotels, and is unsure if the incentives are necessary to draw developers to Anaheim. He also questions Anaheim's status as a destination for luxury hotel development. 

“If you were one of these people who could afford to stay at a high-end hotel and just spent three or four days at a convention, would you stay and spend the rest of your trip in Anaheim?” Reay said in a statement. “Or would you stay somewhere along the coast where you can step outside and touch your feet on the sand? 

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