California hotel construction boom shows no signs of slowing down

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Developers’ love affair with the new hotels isn’t likely to end anytime soon, given the more than 18,000 rooms under construction in the state so far this year, along with tens of thousands more. at various stages of planning.

A total of 130 hotels in California, representing 18,271 rooms, were under construction at the end of June, an increase of 17% from the same period in 2016, according to a mid-year development report prepared by the company. County of Orange Hotel Brokerage. , Atlas Hospitality Group.

Los Angeles County has easily led the way, with its 4,585 hotel rooms accounting for about a quarter of all hotel rooms built in the state.

In addition to ongoing construction, there has been a spate of hotel openings this year – 26 in total for a total of 4,730 rooms, a 63% increase from the first half of 2016.

The state’s largest opening, easily surpassing all others, was the InterContinental in downtown Los Angeles, housed in the 73-story Grand Wilshire Center.

In San Diego County, there were just two hotels that debuted this year – the 317-room Pendry Hotel in downtown San Diego, which is affiliated with the upscale brand Montage, and a 116-room Fairfield Inn and Suites in San Marcos. However, another 10, totaling 1,800 rooms, are under construction – a 96% increase over the volume of hotels built in the first half of 2016, Atlas reported.

The new development crosses the county from Chula Vista to Carlsbad, including a 300-room hotel at the Sycuan Casino, a 250-room Legoland Castle hotel under construction in the Carlsbad theme park, and a 400-room InterContinental on the former Lane Champ in downtown San Diego.

Atlas CEO Alan Reay said it was no surprise that development continued at a rapid pace, after a long period of new construction drought.

“There is a combination of things that drive this. One is the increase in the selling prices of existing hotels, which makes it more attractive for hotel owners to build a new hotel rather than buying something that is 30 years old, ”Reay said. “Second, it’s the availability of construction financing from lenders, which until the last two or three years was almost impossible to find. And finally, we are now in the fifth year of very robust revenue increases in the hospitality industry.

The development list compiled by Atlas includes hundreds of hotels in the planning stages, but it is likely that many of them will never be innovated, or that they are years away from the start date of construction.

In San Diego, for example, the list includes proposed hotels for Harbor Island, the redevelopment of Seaport Village and the Chula Vista waterfront, which may not open for about five years, if they go ahead as planned. A 500-room addition to the San Diego Hilton Bayfront is unlikely to materialize if the city is unable to move forward with the expansion of the city’s convention center.

Even as the California hotel industry continues to post record profits and occupancy levels, the risk of overbuilding remains, Reay warns.

“The general consensus is that if you’re under construction, you’ll be fine because we’re catching up with all the lean years between 2009 and 2013,” he said. “But if you are planning a hotel and you are not under construction, you really need to be aware of how many more rooms we can add to this market.

“We are starting to see income increases start to flatten out and if we have a hit in the economy that could be a problem for people who are not yet out of the ground.”

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