California Hospitality Market Report
Los Angeles
By the Numbers
Occupancy: 71.3%
ADR: $195.46
RevPAR: $139.32
Last 12 Months | Source: CoStar Group
Market Overview
The Los Angeles metro benefits from a strong tourism sector. The area houses many amusement parks and is a primary home for the entertainment industry. Tourism activity in the segment amounts to nearly $35 billion and aids more than 559,000 jobs here. Looking forward, Los Angeles will be one of the host cities for the 2026 FIFA World Cup and 2028 Olympics, which will drive an uptick in hotel demand.
Market Performance
Hotels in Los Angeles have kept strong positions in occupancy and ADR levels. However, a decline in leisure travel has slowed RevPAR, which has dropped by 1.4%. Some areas aiding hotel performance in Los Angeles are the Hollywood/Beverly Hills and Santa Monica/Marina Del Rey submarkets. ADR in both of these submarkets is at $355, which is some of the highest ADR metrics in California.
Construction and Sales
Los Angeles has a robust construction pipeline; about 2,000 rooms are being constructed across 16 properties. The Upper Upscale segment has the most rooms underway, at 20%, compared to other hotel sectors. The largest property in this class is expected to be completed in January 2025. Aiding hotel demand in East Los Angeles, the Jordan San Gabriel— owned by Hilton Worldwide—will deliver 224 units here upon completion.
Hotel sales volume in the Los Angeles metro has declined to $316 million. In the past 12 months, only four sales were above $20 million. The largest sale occurred in March of this year for the Residence Inn, Manhattan Beach property that sold for $68 million.
San Diego
By the Numbers
Occupancy: 82.3%
ADR: $227.48
RevPAR: $187.23
Last 12 Months | Source: CoStar Group
The San Diego metro achieved the highest 12-month occupancy and RevPAR metrics in California, which stood at 73.6% and $155, respectively, through June.
Market Overview
San Diego boasts many attractions, such as SeaWorld and the San Diego Zoo, that draw visitors to the area. Last year, tourism spending totaled $14.3 billion in San Diego County, a 5% uptick compared to 2022. In February 2024, the leisure and hospitality sector added 2,500 jobs. This addition will aid the metro as the area has a variety of conventions lined up for the rest of the year.
Market Performance
While in a good position, RevPAR is forecasted to increase even further with an influx of conferences, concerts, and sporting events during the second half of the year. Weekday travel in the metro is aiding hotel performance the most as group and corporate travel bounce back to pre-pandemic measures. The CBD is leading demand here as it has several attractions for corporate and leisure travel. Business travelers may be drawn to the San Diego Convention Center, while Little Italy and the Gaslamp Quarter provide tourists with dining, shopping, and entertainment opportunities.
Construction and Sales
San Diego stands out from other parts of the U.S. as hotel construction is increasing here. Eleven hotels are undergoing construction, which will bring around 2,819 rooms to the area. Looking ahead, a Luxury-tier Fairmont property will break ground in the next 12 months and will be the largest Fairmont in the U.S. upon delivery. The Fairmont will consist of 1,168 rooms that will be sold for $474,138/room, or $550 million total.
San Diego sales amounted to $449 million in the past 12 months, a drop from the three-year annual sales volume average of $841 million. So far this year, Hilton La Jolla Torrey Pines has been the largest sale. This upper-upscale property with 394 rooms that sold for $165 million, or $418,782/room.
Orange County
By the Numbers
Occupancy: 77.0%
ADR: $211.67
RevPAR: $163.03
Last 12 Months | Source: CoStar Group
Market Overview
Home to Disneyland Resort, the metro constantly sees an influx of visitors to the amusement park. Walt Disney Company is the largest employer here, and it recently announced a rezoning to the park that would create a more immersive experience for visitors. The project is expected to create over 4,000 jobs and $1.1 billion in output during construction.
Market Performance
The 12-month average occupancy through June was 71.2% in Orange County, which stands above the national average. ADR also saw rates increase by 1.6% over the past year, growing to $210 through June. Some areas that aided the boost in the metro’s ADR were the Newport Beach/Dana Point submarket. These locations are popular among tourists due to their proximity to the ocean. ADR here is around $30 more than the Disneyland submarket.
Construction and Sales
Orange County is currently experiencing a slowdown in construction activity, with only one hotel under construction. Yet, this downturn will aid absorption metrics, as around 3,000 rooms were delivered from 2020 to 2021.
Sales in Orange County have totaled around $219 million over the past 12 months. The largest sale just closed in June, with an Upper Upscale hotel selling for $80 million. The 125-room Pacific Edge Hotel was sold for $640,000 per key.
Inland Empire
By the Numbers
Occupancy: 62.6%
ADR: $154.81
RevPAR: $96.98
Last 12 Months | Source: CoStar Group
Market Overview
The Inland Empire receives a variety of visitors each year due to the large span of the region and the different visiting opportunities it provides. For example, leisure travelers often visit Palm Springs for its higher-class resorts and golfing; meanwhile, truck drivers and manufacturers opt to stay in other areas of the Inland Empire, where many distribution centers are located. Riverside and San Bernardino County have noted the highest occupancy levels as these areas are home to many distribution facilities that draw these travelers in.
Market Performance
The metro notes lower ADR and occupancy rates compared to other California markets. The 12-month average ADR is $155.04, and occupancy has declined by -5.3%. Despite these lower rates, Palm Springs helps increase the Inland Empire’s ADR. The 12-month average ADR is over $100 above the second-highest submarket here.
Construction and Sales
There are currently 20 properties under construction in the Inland Empire, totaling 2,075 rooms. Once complete, this will boost inventory in the area by 3.8%. Construction is underway throughout all submarkets within the Inland Empire, emphasizing in the Midscale sector.
Sales in the Inland Empire have slowed down, totaling $177 million during the past 12 months. So far in 2024, Upper Midscale and Midscale properties have led the way for the greatest sale totals in the market.
San Francisco
By the Numbers
Occupancy: 65.8%
ADR: $222.07
RevPAR: $146.13
Last 12 Months | Source: CoStar Group
Market Overview
After the metro took a hit in visitations because of the pandemic, visitors in the area are forecasted to improve to 23.7 million in 2024. Just last year, an increase in visitations totaled $8.8 billion in spending here. The Bay Area is also home to several technology companies, such as Apple and Meta, which could aid demand in corporate travel as people visit the area for work. Events next year will also help in bringing in visitors as the 2025 NBA All Star Game is scheduled at Chase Center.
Market Performance
San Francisco has noted fewer positive trends than other California markets, with little to no RevPAR growth and ADR decreasing by -0.1%. Much of this slowdown is attributed to the metro recovering from the lack of visitors during the pandemic. Yet, San Francisco is expected to see an increase in visitors from China, which marked the highest international visitations to the metro before COVID-19. China listed the U.S. as an approved travel destination, and more nonstop flights have been added from China to San Francisco International Airport. Visits from China are forecast to be 74% of 2019 levels this year.
Construction and Sales
In the past 12 months, four hotels have been delivered, totaling 630 rooms. Three properties are currently under construction, which will increase inventory by 0.4% upon delivery. Most of the hotels on the way are Upscale properties, and the largest hotel in this class is set to open by 4Q 2024.
Increasing insurance costs and the metro’s difficult recovery after COVID-19 have made sales in San Francisco difficult. During the past 12 months, six properties have sold for a total consideration of $119 million.
Sacramento
By the Numbers
Occupancy: 61.3%
ADR: $158.43
RevPAR: $97.13
Last 12 Months | Source: CoStar Group
Market Overview
The Sacramento hospitality market averages 80 keys, falling slightly below the national average of 88 rooms. Additionally, 25% of hotels fall within the Luxury and Upper Upscale segment. Employment has also been on the rise in Sacramento, with 29,000 new jobs over the past year. Additionally, the hospitality segment saw a 2.93% increase in jobs.
Market Performance
Sacramento’s 12-month occupancy is 61.3%, which falls below the national average. While RevPAR has decreased over the past year, averaging $97.13, ADR is expected to see a more positive change, as it is forecast to reach $175.8 late this year.
Construction and Sales
Seven properties are under construction in the Sacramento market, adding 788 rooms and increasing inventory by 2.6%. Six of these properties are Upscale, with the largest one being a 177-room Residence Inn that will be delivered in November 2024.
Twenty hotels have traded over the past 12 months, with the largest sale occurring in March of this year. The 128-key Arden Star Hotel sold to an affordable housing developer for $27.5 million, or $215,000 a key.
