Local Hotel Operator Discusses Coming Challenges For San Diego’s Hospitality Industry
Five new San Diego hotels will open this year in Downtown alone. A total of 1,081 rooms also will be added to the market countywide, and many more hotels are the pipeline throughout the region. So RAR Hospitality CEO Robert Rauch is understandably concerned about how the local hospitality industry will fare with the increase in room supply, the worldwide economy slowing to a snail’s pace, and other factors that could affect local tourism and business travel. Robert is among the hospitality gurus speaking at Bisnow's San Diego Hospitality Development and Seaport’s Takeoff event Aug. 18.
Robert’s company manages Hilton, Marriott International and IHG branded hotels and several independent, historic boutique hotels in San Diego County, including The Lafayette Hotel, Swim Club & Bungalows in SD’s North Park neighborhood, The Keating Hotel in the Gaslamp Quarter (below) and El Cordova Hotel in Coronado.
Robert is shown here ready to catch the ball during a baseball tournament. He plays regularly on the Brooklyn Dodgers 55-plus team.
Robert says the pace of growth for San Diego's economy is slowing, but predicts the region’s 2% growth in GDP will continue through this year, then dip downward in 2017. He expects the economy will experience a soft landing, but no recession like in 2008-2009. The future is unpredictable, Robert says, because no one really knows how various factors, such as China’s economic slowdown, Brexit, the threat of terrorist activity and proposals for increasing San Diego's hotel tax, could affect hotel stays.
Despite China’s economic troubles, he says middle-class Chinese visitors continue to pour into SoCal. The majority come through LAX, because there are no nonstop international flights into San Diego International Airport from China. As a result, Chinese visitors to SD usually come here on one- to three-day tourist excursions, rather than making San Diego a primary destination. Robert is hopeful the San Diego Tourism Authority and San Diego County Regional Airport Authority, which are in negotiations with several Chinese carriers, will be successful in securing nonstop service to San Diego from China. So hopeful that he is studying Mandarin Chinese.
Pictured is RAR Hospitality's historic El Cordova Hotel in Downtown Coronado.
Adding to the uncertainty, he tells Bisnow, is the proposed hotel tax hike to build a stadium and/or expand the convention center. “The convention center expansion would bring a lot more business to San Diego,” he says, but he contends it won’t have a big impact unless it’s contiguous with the existing facility.
Unless the Chargers stadium is a multi-use facility, it will not generate the level of activity that Petco Park does, because the Padres play 81 home games annually, while the Chargers only play eight home games—nine if they make the playoffs, and possibly a Super Bowl every 10 years. Additionally, he said the Padres will lose parking if the Convadium is built.
California voters also are being asked to vote for a $4.3B state budget increase earmarked for funding school construction. If Prop 98 fails, Level 3 developer fees to build new school facilities may triple to make up the difference.
Robert also weighed in on the controversy over Airbnb’s impact on the hospitality industry, noting Airbnb is becoming increasingly popular with San Diego tourists who don’t like hotel prices. During Comic-Con last month, everyone with an extra room or empty apartment offered it on Airbnb, he says, essentially stealing business from hotel operators. While it didn’t affect business at his hotels because he was fully booked in advance, Robert says it may have affected higher rates charged during special events at some local hotels.
He contends Airbnb is a greater threat to online travel services than hotel operators, and suggests hotels take advantage of Airbnb’s booking service to fill empty rooms, as it only charges 3% for bookings, while Expedia, which now owns the majority of online booking services, charges hotel operators 17% to 25%. He is testing the waters by offering rooms at one of his hotels on Airbnb. Built in the 1940s, The Lafayette Hotel, Swim Club & Bungalows (above) was popular among celebrities in years past.
Robert also predicts Airbnb will grow tired of fighting with cities for the right to operate within their jurisdictions and will find it easier to become another online booking service, raising its fees, but remaining competitive by continuing to charge less than Expedia and other online travel agencies.
Hear more from Robert and our other local hospitality experts at our San Diego Hospitality Development and The Seaport’s Takeoff on Aug. 18, beginning at 7:30am with breakfast and networking at the Hyatt Regency Mission Bay at 1441 Quivira Road in San Diego.