Northern California Hospitality Market Report
The hospitality sector in Northern California has an active investment market with 48 hotel trades recorded over the past year which is above the three-year average. Northern California also has a diverse hotel stock, with plenty of hotels at both the high-end and cost-efficient ends of the spectrum. Specifically, it is one of about 10 U.S. hotel markets with an above-average proportion of economy and midscale units, and an above-average proportion of upscale and luxury rooms. Additionally, the sector has continued to perform exceptionally well in the San Francisco/San Mateo, San Jose/Santa Cruz, Sacramento, and Oakland regions.
Highlights
- In the past 12 months, San Francisco had 15 properties traded, representing a sales volume of $648 million.
- Strong hotel development continues in San Jose/Santa Cruz, with nearly 1,700 rooms added in the past 12 months.
- Over 25 percent of the Sacramento market rooms are luxury or upscale, a proportion that only exists in about one in five U.S. markets.
- In the past 12 months, monthly occupancy has averaged 66 percent, moderately above the national average of 62.7 percent.
San Francisco/San Mateo Performance| Construction | Sales
San Francisco/San Mateo achieved a more robust recovery in 2022, with RevPAR exceeding $100 in March for the first time in two years. The boost in performance was attributed to the return of some major citywide conferences, including DreamForce, bringing a number of visitors to the area. The lifting of international travel restrictions in 2022 benefited San Francisco’s recovery. Before the pandemic, nearly one-third of travelers to San Francisco were international tourists, making made up 63 percent of all tourism spending. There are approximately 1,200 hotel rooms distributed among eight hotels under construction in the San Francisco/San Mateo market. Most of the under-construction hotels are expected to open in 2023, increasing hotel inventory by 2.4 percent, if there are no delays.
San Jose/Santa Cruz Performance | Construction | Sales
San Jose’s hotel industry’s recovery has been slow making the market one of the hardest hit nationally. However, recovery is progressing as RevPAR has increased by 70.5 percent in the past 12 months. Annual hotel room demand and average daily rate are not projected to recover to 2019 levels within the next few years, but due to an unusually high influx of hotel inventory entering the market, occupancy should recover by 2027. In the past 12 months, the market saw a supply increase of 6.9 percent. In 2022, hotel sales volume was significant, reaching the highest amount since 2015. Much of the sales volume came from the 510-room San Jose Marriott trading in the 25-hotel acquisition of Watermark Lodging Trust to Brookfield Asset Management.
Sacramento Performance | Construction | Sales
The Sacramento market comprises 360 hotel properties, which contain around 29,000 total rooms. The inventory skews toward the high end. Occupancies in the past 12 months have averaged 64.1 percent, which is a step ahead of the 62.7 percent seen nationwide. Twelve-month RevPAR was up sharply as of November 2022, climbing at a 23.2 percent year-over-year rate. The construction pipeline is highly active, with 1,700 rooms currently underway, representing a 5.9 percent expansion to the existing inventory. Sacramento houses an active market for hotel investment and saw about 22 trades over the past year.
Oakland Performance | Construction | Sales
The Oakland market comprises 235 hotel properties, containing around 22,000 rooms in total. Hotels in the area have around 92 rooms on average. The 820 rooms currently underway represent a significant expansion relative to the size of the market. This extends a stretch of new development, which saw nine projects containing around 1,300 rooms delivered in the past three years. Additionally, Oakland’s investment activity in the past year (12 trades) easily exceeded the market’s three-year average.
