The Shore Hotel is proposing a new on-site hostel as a way to offset the loss of low-cost hotel rooms that occurred when the project was built.

Hotel operator Sunshine Enterprises is asking to pay $8 million in fees, build the hostel on site and temporarily lower prices on some rooms in exchange for after-the-fact permits related to construction of the building 20 years ago.

The dispute dates back to 2009 when the Farzam family applied to demolish their two hotels on Ocean Avenue (the Pacific Sands Motel and a Travelodge) and replace them with a new 164 room hotel. The application specifically said the family would build a moderately-priced hotel rather than a new luxury property.

Coastal Commission approved the project pending receipt of some specific geological and archaeological reports. While the owners contend they filed the required paperwork, Coastal Commission staff said the reports were not filed and no Coastal Commission permit was issued for the work.

A City construction permit was issued for the project and the Shore Hotel was built as a boutique hotel with prices significantly higher than initially proposed.

“The hotel actually constructed on site is, in fact, a luxury hotel,” said Commission staff in their report.

The Commission began efforts to bring the project into compliance in 2014 and after a protracted legal fight, the hotel operator was issued a $15.8 million fine in May of this year. However, additional fees were suspended after Commissioners said they’d rather see low cost lodging return to the area.

At their Dec. 11 meeting in Calabasas, the Commission will hear the Shore’s proposal for addressing the loss of low-cost rooms.

“The proposal includes a lower cost overnight accommodations mitigation 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 which will provide overnight stays, 12 nights per year, free to underserved youth groups of approximately 35-40 youths,” said the staff report. “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.”

Staff had asked for between 72 and 95 of the hotels’ existing rooms to be offered at a lower rate. According to the staff report, the hotel operator said the facility is currently breaking even but an accounting sheet submitted by the hotel did not allow staff to properly evaluate that claim.

“Notably, the accounting sheet did not include any other sources of revenue the hotel 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,” said the staff report. “Moreover, 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 (lower cost rooms lost) or the 95 (72 lower cost rooms lost plus 25% of the new high cost rooms constructed) rooms onsite within the existing hotel. The information that staff was able to ascertain from the accounting sheet 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.”

Following release of the Coastal Commission report, Santa Monica City Councilmembers Kevin McKeown and Terry O’Day added a discussion item to Tuesday’s Council meeting.

The item is asking the entire council to “express to the Coastal Commission its concern that the loss of affordable room accommodations in the city has reduced coastal access, and the after-the-fact Coastal Development Permit proposed for The Shore Hotel does not adequately restore the loss of affordable room accommodations, as was anticipated from that development when it was presented.”

The Shore Hotel declined to comment in advance of the meeting and Coastal Commission staff are recommending approval of the combined mitigation project. Visit for more information.

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