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Local Vintners Savor Taste of High Court’s Ruling

A Supreme Court ruling opening the doors for consumers to receive direct shipments of wine across state borders has prompted at least one of San Diego’s boutique vintners to predict a rosier future for revenues.

“I expect to get a 50 percent increase in revenue over the next two to three years,” said Leon Santoro, the general manager and winemaker for Orfila Vineyards in Escondido.

The 5-4 Supreme Court decision May 16 struck down the laws in New York and Michigan, which bar them from receiving shipments directly from out-of-state wineries, while allowing them to receive direct shipments from in-state vineyards.

The justices ruled that the selective bans violate the Constitution’s guarantee of freely flowing commerce.

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Before the May 16 decision, roughly half the states permitted wine shipments directly to consumers, while half did not.

The ruling does not mean that states must allow direct shipments of alcohol to consumers across state borders. It just stipulates that those allowing direct shipments have to be evenhanded in the process and lawmakers in other states now have a choice.

Santoro said that while Orfila has sold a small quantity of wine through a few New York distributors, most prefer to deal strictly with large wineries that can provide them enough volume to keep major grocers and liquor outlets supplied.

“The Supreme Court’s decision doesn’t make any difference to Kendall Jackson or Gallo,” he said. “They sell to distributors. They sell all over. This decision affects only 2-3 percent of the national wine market.

“These are the wineries that make high-quality, limited-production wines that you release and four months later they’re gone. We’re in that category.”

Nevertheless, he estimates that the ruling opens the door for small wineries, including those in San Diego, to ship more cases on an annual basis. A standard case has 12 bottles, each containing 750 milliliters.

There is no trade association in San Diego County that keeps track of specialty vintners, yet Santoro counts at least 12. And there aren’t any strict classifications of wineries in terms of their size. But generally speaking, those that produce 20,000 cases or fewer a year are considered boutique wineries, Santoro said.

In 2005, Orfila is expected to produce from 15,000 to 20,000 cases, while its 2004 output was about 15,000 cases, he said.

To take advantage of the recent Supreme Court decision, he said the company would beef up its Web site to market to more out-of-state consumers.

“This is a landmark decision, and maybe there is a chance for artistic winemakers to survive,” he added.

But he said he’s less optimistic that states currently barring vintners from shipping directly to consumers within state lines will change their laws since he expects liquor wholesalers would resist such a move.

“To them it comes down to dollars and cents,” Santoro said. “But the issue is really about consumers’ ability to find limited-quantity, high-quality wine.”

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Hotel Rooms Getting Pricier:

While the county’s hoteliers saw a slim 1.2 percent increase in the number of rooms they rented during an unseasonably rainy first quarter, the amount of money people paid for nightly stays rose by 4.4 percent compared with the same period in 2004.

According to Los Angeles-based PKF Consulting, which tracks revenue trends in the lodging industry nationwide, the overall average occupancy rate for San Diego hotels was 73.5 percent from January through March compared with 72.6 percent in the like year-ago period, while the average daily room rate was $144.01 vs. $138.

Two sectors , defined by PKF as North Coastal, where nightly room rates stood at an average $125.57, and Sports Arena/Old Town, where they averaged $103 , topped others across the county with an increase of 6.9 percent each in the quarterly comparison.

Mission Valley hotels had the lowest rate increase , 1 percent to $100.18. Meanwhile, La Jolla had the highest average rate , $206.24 a night, up 6.1 percent from $194.34 in the first quarter last year.


Send tourism and hospitality news to Connie Lewis via fax at (858) 571-3628 or by e-mail to clewis@sdbj.com. She may also be reached by phone at (858) 277-6359.

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