California's hospitality market has been strong in 2017, particularly in Los Angeles, with steady hotel room demand that increased occupancy and revenue growth in the first half of the year, according to Marcus & Millichap.

The Los Angeles-Long Beach area did particularly well due to strong tourism and convention business. In the year ending in June, the LA Convention Center had the highest number of bookings on record, the brokerage's hospitality research report noted. During that time, Los Angeles-Long Beach added more than 3,500 rooms in 13 hotels. The metro area's average daily rate rose by the most in the state, up 39.1% to $182.13. That generated a 55.1% increase in revenue per available room.

The state's strong hotel market has drawn buyer interest. In Los Angeles, the low number of properties on the market meant higher prices, with hotels trading at around $200K/room.

For the 12 months ahead that started in July, the forecast is for more growth. Room nights are expected to outpace deliveries, increasing occupancy to 75.8% from 75.4%, and the average daily rate is expected to increase 3.8% to $163.63 by next June. Revenue per available room is forecast to increase 4.4% to $124.02.

There are about 17,800 rooms under construction in California. The Los Angeles-Long Beach area has nearly 4,900 rooms under construction and is scheduled to break ground on 4,800 more in the next 12 months.