California hotel construction in full swing

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After a record-breaking 2017, hotel development across California so far this year shows no signs of slowing down, although construction costs continue to rise.

There are 182 hotels with nearly 25,000 rooms under construction statewide – a 40% increase from the first half of 2017, the Atlas Hospitality Group reports in its biannual hotel development survey.

For memory :

6:55 p.m. July 25, 2018An earlier version of this story indicated that 21 hotels with 3,410 rooms were under construction during the first half of the year in San Diego County, which is an 81% increase from the same period in 2017. In fact, 20 hotels with more than 3,000 rooms were under construction in the county, an increase of 63%. The total for the state in the first half of the year was 182 hotels with almost 25,000 rooms, not 183 homes with almost 26,000 rooms.

Expect more of the same, especially in Southern California destinations such as downtown Los Angeles and San Diego, as well as Anaheim, where the developers have been particularly optimistic. Of the 2,400 hotel rooms under construction in Orange County, the vast majority – nearly 1,800 – are in Anaheim.

The largest hotel to open in Los Angeles County so far this year is the 288-room Sheraton Los Angeles San Gabriel, which welcomes Chinese visitors with Mandarin-speaking concierges and an upscale Sichuan restaurant. It has a fleet of eight robots that can offer instructions to guests and deliver towels and other items to rooms.

In downtown Los Angeles, the luxurious NoMad is housed in a 12-story former Bank of Italy office building built in 1923. In its most elegant restaurant, customers sit on a mezzanine overlooking the grand lobby. old bank dine on foie gras, suckling pig and baked Alaska. .

San Diego County’s newest addition is the Legoland Castle Hotel, a 250-room, family-run hotel with castle-themed rooms and decor at the entrance to Legloland California Theme Park in Carlsbad.

Orange and Los Angeles counties saw strong growth spurts in construction, up 100% and 25%, respectively, in the first half of 2018 compared to the same period of 2017.

In San Diego County, hotel rooms under construction in the first half of this year jumped 63% from the same period a year earlier. Individual properties span the area, from the Pala and Sycuan casinos to downtown San Diego InterContinental, a 400-room property set to open next month.

Fueling the enthusiasm for the ongoing development has been an unstoppable increase in hotel occupancy and income levels over the past eight years, surpassing the country as a whole.

Current occupancy rates in the Los Angeles and San Diego markets remain in the neighborhood of 70% and are expected to stay at that level, well ahead of the national rate of 66%, according to CBRE Hotels.

“We keep doing market research for new hotels and every now and then we come to a negative result, but we find that the market can still absorb new offers,” said Bruce Baltin, general manager of the office of CBRE in Los Angeles. “The industry as a whole has kept pace with its growth in recent years due to concern over the potential for overbuilding, but so far the industry is absorbing supply very well with still a good rate. occupation. “

While statewide, the number of hotel rooms opened this year is down from the first half of 2017, construction underway paints a much more dramatic picture of what lies ahead.

In Los Angeles County, for example, there are 37 hotels with 5,631 rooms under construction, compared to just four hotels that have opened so far this year. Similarly, in San Diego County, 20 hotels with more than 3,000 rooms are in various stages of construction, while only four hotels have opened this year, the largest being the Castle Hotel in Legoland, Atlas reports.

“Construction costs are going up 20-25%, which has caused some people to take a break,” said Alan Reay, president of Atlas Hospitality. “But people are looking at long term projects in San Diego, downtown LA, in the Bay Area.

“And the financing is still available and at low interest rates. Even before the last recession, the counties of San Diego, Los Angeles and Orange were below the national average in terms of the level of supply because it is so difficult to get permits in California and the granting process is so long.

Reay noted that in downtown Los Angeles, the impetus behind many larger projects is the desire to attract more leisure travelers as well as business meetings for its convention center. Some developers, he said, are taking advantage of lucrative government grants, such as a 1,153-room resort across from the Convention Center approved in May by Los Angeles City Council.

San Diego hotel developer Robert Green, who has several hotel projects in California, either under construction or in planning, says he understands the risk of overbuilding, but strategically chooses desirable locations which he says will pay off in the long run.

His company opened the Pendry in San Diego’s Gaslamp neighborhood last year and is preparing to submit an application this fall to develop another hotel across the street, he said. Green also has projects in La Quinta, Sonoma County, Silicon Valley, and Del Mar.

“That’s why my hair is gray,” Green joked. “It’s our business, we will see cycles, but we completed two hotels in 2017 and we will finish two in 2020..

“You never know, you can’t predict where you will be in a year or two. We will therefore have to adapt accordingly.

Weisberg writes for the San Diego Union Tribune.

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UPDATES:

July 26, 11:45 am: This article has been updated with details on new hotel openings.

This article was originally published on July 25 at 1:10 p.m.


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