California hotel development has experienced stagnation across the sector in the first half of the year. According to a recent hotel development survey from Atlas Hospitality Group, the state has seen a significant decrease of more than 60 percent over the past two years in the opening of new hotels and rooms in the first half of the year, with expectations for further market strain in the next few quarters.
Across the whole of California, a total of 20 hotels opened so far this year, which is a decline of 31 percent when compared to the same period last year. The total number of rooms developed declined by 24 percent. However, the number of hotels under construction saw a slight increase by around five percent, while the number of rooms was relatively flat, around 16,000 rooms for both periods.
“New hotel development in California has been seriously impacted by the steep rise in construction cost and supply issues. Going forward when we take into account the rapid rise in interest cost and the lack of construction financing, we are going to continue to see further declines in new openings and under construction over the next 18-24 months,” said Atlas Hospitality Group President Alan Reay.
Southern California
When looking at the data outlined in the report, Los Angeles County leads the state in new openings, under construction and projects in planning. In the first six months of 2023, a total of six hotels opened in Los Angeles County, with the largest one being the 380-room Moxy Los Angeles located downtown at 1260 S Figueroa St. Los Angeles County also has the largest number of hotels under construction in the state of California, with 21 hotels and just over 2,300 rooms being built. The largest hotel project in the County is the 225-room Jordan Hotel, which is part of the Curio Collection by Hilton, located at 111 W Valley Blvd. in San Gabriel. Los Angeles County has a further 230 hotels and over 35,000 rooms in planning. This is a slight decline over the same period last year, but still the leader in the whole of California.
San Diego County opened a single hotel in the first six months of 2023, the 145-room AC Hotel by Marriott, located in San Diego’s Gaslamp Quarter at 743 Fifth Ave. There are six other hotels with approximately 2,100 rooms under construction in the county, including the largest one in the whole of California being the 1,600-room Gaylord Bayfront Hotel in Chula Vista.
In the Inland Empire, both Riverside and San Bernardino counties each saw one hotel opened for the period. Both counties also have ten hotels with over 1,000 rooms under construction.
Orange County continues to show the strain on the hospitality sector, having once again not opened any hotels. The county does have five hotels under construction, the largest one being the 350-room Disneyland Vacation Tower in Anaheim.
Northern California
Northern California shows similar results to the Southern part of the state. San Francisco and Santa Clara counties have not seen any new openings in the first half of the year. However, San Francisco awaits the completion of the 169-room Waldorf Astoria, with further 51 hotels with over 6,000 rooms in the planning in San Francisco County. Santa Clara County currently has six hotels under construction, the Treehouse Hotel in Sunnyvale with 254 rooms being the largest one.
Sacramento and Alameda Counties both opened three hotels each in the first six months of 2023, the two largest being the Residence Inn in Oakland and the Hyatt House Sacramento Midtown. Sacramento County has four more hotels being built and close to 40 more in planning, while Alameda County has five more hotels under construction and over 45 in the planning pipeline.
While the current hotel openings have been on the decline, the strain has been evenly split between Northern and Southern California, with the whole State showing the signs of recent pressure and the decrease in the number of new hotels added when compared to the same period last year. Current under construction projects are also spread equally with Southern California showing a total of 63 hotels being built, compared to 59 in the Northern Counties.
Looking further ahead at the planning pipelines, Southern California has close to 670 hotels and over 90,000 rooms in planning with Los Angeles County leading the way with 230 hotels, while Northern California has close to 570 and over 70,000 rooms in various design stages, with Santa Clara County taking the helm with 84 hotels.
