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Bullish On San Diego, Marriott Continues To Invest In The Downtown Market

Marriott International has a new project in the works in Downtown San Diego—the city's first Ritz-Carlton Hotel & Residences, according to Marriott SVP of lodging development for the Western Region Tye Turman. Tye (shown below with wife Debbi) is among the hotel developers speaking at Bisnow's San Diego Hospitality Development Takeoff event on Thursday.

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Marriott International now has 27 hotels throughout the San Diego region—eight in Downtown with the recent opening of the dual-branded SpringHill Suites & Residence Inn Downtown Bayfront at BRIC, a new waterfront retail destination and park.

The new five-star Ritz-Carlton Hotel & Residences (below) is part of locally based Cisterra Development’s recently approved 7th & Market, a $400M mixed-use project in East Village. It includes 153 rooms and 59 Ritz-Carlton-branded condominium residences, with a 40k SF Whole Foods Market on the ground level.

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Marriott is obviously bullish on Downtown SD, demonstrating its confidence with continued investment in this market. Besides the BRIC and Ritz-Carlton projects, Marriott recently opened a Courtyard Marriott Gaslamp Quarter. Scheduled for completion in 2018, locally based J Street Hospitality’s 126-room Moxy Hotel Gaslamp Quarter (below) is also rising on the edge of this popular district. The Moxy is a lifestyle brand Marriott originally launched in Europe that targets Millennials looking for style at an attractive price.

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222-room TownePlace Suites by Marriott at Liberty Station (below), part of a $150M, 650-room, three-brand hotel project by a JV of The Corky McMillin Cos and InterMountain Management LLC, is rising in Point Loma near SD International Airport. Scottsdale-based The Briad Group also plans to build a new 147-key AC Hotel by Marriott in the Gaslamp Quarter. The Marriott Marquis San Diego Marina on Harbor Drive also is undergoing a $107M makeover and expansion.

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Tye’s biggest concerns going forward are rising construction costs; the looming specter of an economic downturn; and financing, as lenders are tightening their purse strings. “The state of the economy is top-of-mind at every meeting I’ve attended in 2016,” Tye says. “No one knows when or what will trigger it—how much time we have.”

Pictured below is Marriott's recently opened SpringHill Suites & Residence Inn Downtown Bayfront at BRIC, which includes a park on the site of The Padres first ballpark and a 40k SF retail destination.

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Rising construction costs are exacerbated by competition for the best sites in places like San Diego, Tye says. Securing financing is becoming difficult, because so many hotels are under construction. “We’ve had major banks tell us flat-out: ‘We’re not doing hotels now,'" Tye says, adding that while lenders are concerned about oversupply of hotel rooms, there’s a significant number of obsolete hotels that should be replaced. “The pullback by lenders is not just in the hotel class, but is beginning to affect office and multifamily development, too.”

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Pictured above is The 147-key AC Hotel by Marriott in the Gaslamp Quarter proposed by The Briad Group.

Tye isn’t worried about a hotel tax hike hurting tourism or hotel occupancy, because most cities are doing this, and it hasn’t hampered hotel business. But he is opposed to the Convadium concept. “I’m a big believer that the convention center should be in one place, and the Bayfront location is ideal. I believe that in the long term this will benefit both the city and hotels,” Tye says, suggesting the hotel tax increase is justified to get more convention space, but warning that, once in place, the tax will never go away.

Pictured below is a rendering of the proposed $107M renovation and expansion of the Marriott Marquis San Diego Marina on Harbor Drive.

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Tye also weighed in on the controversy over Airbnb’s role in the hospitality sector. “Yes, Airbnb is competition for hotels,” he says, “but I don’t think it’s a good fit for business travelers, who prefer dependable lodging and consistent quality.” The main issue, Tye says, is Airbnb doesn’t have to play by the same rules as hotels.

“The biggest thing for hotel developers is the cost of meeting government requirements and guidelines for hotels,” he says, citing the American With Disabilities Act as a prime example, and notes ADA doesn’t affect Airbnb. Tye says hoteliers are required to collect sales and occupancy tax, while Airbnb operators do not.

Hear more from Tye and other hotel developers at our San Diego Hospitality Development Takeoff this Thursday, beginning at 7:30 am with breakfast and networking at the Hyatt Regency Mission Bay at 1441 Quivira Road in San Diego.