Southern California Hospitality Market Report
Inland Empire
Market Overview
Inland Empire boasts a relatively large hospitality industry, encompassing approximately 54,000 rooms distributed among 732 properties. What sets this market apart is its prevalence of smaller hotels, a departure from the norm for markets this size. On average, each property offers around 73 rooms, less than the national average of 89 rooms.
Inland Empire’s hospitality inventory is characterized by its diversity, featuring various accommodation options from upscale establishments to budget-friendly ones.
Market Performance
Inland Empire’s occupancies in the last 12 months have averaged 65.6%, slightly higher than the nationwide average of 63.2%. This trend is no surprise, given the fact that Inland Empire fared considerably better than most markets during the COVID-19 pandemic. As of August 2023, the year-over-year (YOY) RevPAR in the Inland Empire hospitality market remained essentially unchanged over the past 12 months and currently stands at $102.02. The construction of 2,300 rooms in progress within the Inland Empire market signifies substantial growth in relation to the market’s size. The market also hosts a vibrant hospitality investment market and has witnessed approximately 30 transactions in the last 12 months.
Inland Empire, by the Numbers Last 12 Months
Source: CoStar Group
- Occupancy: 65.6%
- ADR: $155.57
- RevPAR: $102.02
- Supply: 19.1M SF
- Demand: 12.6M SF
San Diego
Market Overview
As the hospitality sector enters a normalization phase, certain leisure-focused destinations like San Diego are encountering a minor decline in their performance. The shift in leisure demand is a result of increased travel choices, including urban and international destinations, as well as a resurgence of pre-pandemic travel spending patterns.
San Diego’s leisure performance has undergone a relatively modest change compared to other destinations, primarily because the mild weather in the region doesn’t lead to significant seasonal fluctuations.
Market Performance
Since March of 2023, the San Diego market’s 12-month average ADR and RevPAR have remained consistently high, hovering around $210 and $155, respectively. Even in the face of an expected economic downturn at year end and the return to typical leisure travel patterns, annual ADR and RevPAR are projected to experience growth over the next five years. Hotel construction activity is decelerating in most national markets, but it’s on the rise in San Diego. Currently, six hotels, comprising 2,470 rooms, are in the construction phase. These hotels are set to open gradually between now and 2025, contributing to a 3.8% increase in the overall hotel inventory in the area. During H1 2023, hotel transactions in the San Diego market mirrored the nationwide pattern of experiencing a substantial decline compared to the previous year. However, hotel investment sales saw an uptick in Q3 2023, approaching the $200 million mark.
San Diego, by the Numbers Last 12 Months
Source: CoStar Group
- Occupancy: 73.8%
- ADR: $209.94
- RevPAR: $154.97
- Supply: 23.5M SF
- Demand: 17.5M SF
Los Angeles
Market Overview
Hotels within the Los Angeles market consistently uphold some of the highest occupancy levels and ADRs nationwide. The market’s appeal, driven by its beaches, Hollywood, and Universal Studios, continues to attract primarily leisure travelers. Nonetheless, in line with national trends, hotel performance during the summer witnessed a decline as the phenomenon of “revenge travel” subsided, and leisure visitors returned to their typical travel habits.
Los Angeles stands out as one of the few U.S. markets with 12-month average occupancy rates surpassing 70%, although it remains below the levels seen in 2019, which were nearly 80%.
Market Performance
The Los Angeles market saw YOY increases in occupancy, ADR, and RevPAR for the year up to August. However, the 12-month average hotel occupancy is anticipated to not fully rebound until 2026, primarily because of the introduction of new hotel accommodations and the delayed resurgence of international tourists. Around 2,300 rooms across 17 hotels are currently in the construction phase, which is set to lead to a 2.0% expansion in inventory over the coming years. Investment activity was more robust in Q1 2023 but stalled after. This stall is heavily attributed to the new transfer tax on residential and commercial property that went into effect in April. Since the transfer tax, also known as the “Mansion Tax,” took effect, no hotels have traded in the Los Angeles hospitality market.
Los Angeles, by the Numbers Last 12 Months
Source: CoStar Group
- Occupancy: 71.7%
- ADR: $198.20
- RevPAR: $142.19
- Supply: 41.9M SF
- Demand: 30M SF
