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California Seeing An Influx Of Hotel Developments Midway Through The Year

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California is on a record-breaking pace for hotel openings and construction this year with Los Angeles leading the way, according to a report by Atlas Hospitality Group.

Atlas Hospitality's midyear California Hotel Development Survey found that 36 hotels opened in the first half of this year in the state compared to 26 during the same time period last year.

The number of hotels under construction increased 28% from 183 to 234, the report found. The number of new rooms under construction increased 25% from 25,872 to 32,424.

Rendering of the JW Marriott Anaheim
Rendering of the JW Marriott Anaheim

The report also found there were 1,143 hotels in various planning stages midway through 2019, compared to 959 in the first half of last year. 

Los Angeles is leading the way, according to the report. This year, Los Angeles opened four new hotels totaling 505 units — the largest being the 271-room Santa Monica Proper Hotel. 

"California hotels are seeing record revenues and profits across the state, with a strong economy and high demand from both business travelers and tourists," Atlas Hospitality President Alan Reay told Bisnow. "In addition, the cost of existing hotels are close to construction cost or even above in some markets, which makes it more appealing to build rather than purchase existing."

Reay said downtown Los Angeles especially is experiencing a hotel boom because of the huge amount of commercial development in the area, the expanded convention center attracting larger groups, a solid entertainment base and a growing residential market.

"Last but not least, the city of Los Angeles has attracted a huge amount of new hotel projects with the attractive tax rebates and incentives," Reay said.

Orange County opened two hotels with 280 rooms in the first half of this year. Orange County has 17 hotels with 3,396 rooms under construction, including two four-diamond resorts, a 613-room Westin Anaheim Resort and the 466-room JW Marriott Anaheim.

Hotels planned for the county are up 6% from the previous year to 67 hotels totaling 10,499 rooms, according to the report.

"In Orange County, Disney's new Star Wars [land] and Anaheim has been the biggest single driver of new projects," Reay said. "The city of Anaheim, though not as aggressive as LA, has attracted their first two luxury resorts, Westin and JW Marriott, by offering the developers tax rebates. Irvine with its strong office and commercial base is also attracting new hotels."

Westin Anaheim Resort in Anaheim, Calif.
Rendering of Westin Anaheim Resort

In San Francisco, three hotels totaling 627 rooms opened in the first half of the year with the largest being a 230-room Hyatt Place. Four hotels with 846 rooms are under construction, led by the 250-room Marriott SoMa Mission Bay in San Francisco.

San Francisco County has 52 hotels and 7,493 rooms in planning, up 27% and 21%, respectively, according to the report.  

In San Diego, the county added five hotels with 860 rooms. The largest was the 302-room Sycuan Casino Resort in El Cajon. There are 19 hotels with 2,310 rooms under construction, and hotels planned for the county are up 17% to 98 hotels and 17,870 rooms.

Reay said he didn't expect any slowdown for the rest of the year. Despite some experts warning of a slowdown or recession in the next couple of years, hotel developers are still bullish on the California hospitality market.

"Despite the surge of new hotels and rooms, many developers and lenders continue to see the California market as attractive from the standpoint that there are certain barriers to entry and the long-term outlook for growth in business and tourism is probably second to no other state in the country," Reay said. "We are always concerned about a downturn, but for those investors looking long term, California is the place to be."