SANTA MONICA—The Shore Hotel on Ocean Avenue in Santa Monica proposed a new onsite hostel accommodation to offset the loss of low cost hotel rooms that occurred when the hotel was built. The hostel accommodation project comes after the hotel was fined $15.58 million in May 2019 for operating a luxury hotel illegally without a coastal development permit from California Coastal Commissions.

The CCA requested having the hotel owner’s convert a select number of the hotel’s luxury rooms into affordable accommodations.

Developers of the hotel, Sunshine Enterprises, replaced two planned motels at the hotels current site that had originally received approval from the commission in 2009. The commission granted approval for the property project to build low to moderately priced motels with rooms costing approximately $160 a night. Sunshine Enterprises began building a new hotel project in 2011 after the original project plan expired. Rates for the new hotel now on Ocean Avenue range from $300 to $800 a night, according to California Coastal Commissions.

Additional fees to the $15.58 million fine were suspended in May after Commissioners indicated that they would rather see low cost lodging return to Santa Monica. The Coastal Commission’s May report stated that, “The proposal includes a lower cost overnight accommodation package to include an in-lieu fee of $8,288,312, construction of a 14 bed low-cost hostel with rates no more than $52 per bed per night, and an overnight youth lodging program that will provide free overnight stays to underserved youth groups of approximately 35-40 youths 12 nights per year. The applicant has also proposed to immediately offer 14 rooms in the existing hotel to public service employees at a lower-cost rate of $127 per night until the on-site hostel begins operation.”

The May report also stated that,“The accounting sheet provided by the hotel did not include other sources of revenue it may have such as the car rental service, leasing a portion of the parking garage, or the sales or rental income from the onsite restaurant. The applicant’s decision to unlawfully construct a luxury hotel that requires high-cost rates in order to be economically profitable is not a justification for failing to provide lower-cost accommodations as required by the Coastal Act. It is not clear from the submitted information if it is actually infeasible to provide the 72 rooms at a lower cost, or the 95 rooms at a lower cost plus 25% of the new high cost.  The information that staff was able to ascertain from the accounting sheet provided is that the applicant would likely be able to provide approximately 10 rooms within the existing hotel at lower cost rates without suffering any loss of revenue.”

The city of Santa Monica fined Sunshine Enterprises $1.2 million in 2014 for failing to provide affordable accommodations under the city’s rules. Sunshine Enterprises applied for the appropriate permits to legally represent the Shore Hotel in 2015, but were denied fulfillment by the California Coastal Commission. After being denied permit access, Sunshine Enterprises filed a lawsuit challenging the Coastal Commissions decision.

A Los Angeles Superior Court judge ruled in favor of the Coastal Commission’s decision, calling Sunshine’s actions a case of “bait and switch.” Bait and switch is a sales tactic that lures customers with low prices on unavailable conditions to upsell them on similar, pricier conditions. In this case, hotel accommodations, which is considered a form of retail sales fraud.

The Coastal Commission will hear the hotels proposal for addressing the loss of low-cost rooms on Wednesday, December 11, at their meeting in Calabasas.