San Diego Business Journal
07/28/16

Hotel Boom Propels Variety of Projects
By Lou Hirsh

http://www.sdbj.com/news/2016/jul/28/hotel-boom-propels-variety-projects/

San Diego — Developers of Pendry San Diego, a new $100 million luxury hotel set to open this November in the Gaslamp Quarter, say they’re not worried that other posh competitors have also set their sights on downtown San Diego.

Co-developers Alan Fuerstman, CEO of Irvine-headquartered Montage Hotels & Resorts, and Robert Green of Encinitas maintain their 317-room hotel — with several public venues including an upscale, seafood-oriented restaurant and bar called Lionfish — will draw a steady crowd of visitors and locals to the vibrant Gaslamp neighborhood.

“We think there’s a big market out there for projects where design meets service meets hospitality,” said Alan’s son Michael Fuerstman, co-founder of Montage Hotels and creative director for the new Pendry brand, during a recent preview for the hotel.

Operators will eventually be up against a 400-room luxury InterContinental Hotel, whose developers recently started construction at the downtown waterfront site of the former Lane Field ballpark; and a 153-room Ritz-Carlton being planned for a mixed-use development in the works in nearby East Village, just a few blocks from the new Pendry.

Not Just Luxury Brands
However it plays out, the potential battle of the luxury brands is just one facet of a countywide boom in new hotel development, spurred in part by continued post-recession improvement in the local and national tourism economy. Many are luxury-oriented, especially near the downtown waterfront, but projects spanning multiple price ranges are in development.

In a recent mid-year report on California hotel development trends, brokerage and consulting firm Atlas Hospitality Group noted that San Diego County added six completed hotels with 1,017 rooms in the first six months of 2016. The largest was a dual-branded, 400-room Marriott hotel (a connected SpringHill Suites and Residence Inn) that opened in the first phase of the Lane Field development.

There were four hotels with 957 rooms under construction countywide at the end of June, the largest being the 400-room InterContinental being built in the second phase of the Lane Field project. San Diego County also has 52 other hotels with 10,439 rooms in various pre-construction planning stages.

Atlas President Alan Reay said California generally is in the midst of a hotel building boom, spurred in part by healthy increases in revenue per available room (RevPAR) over the past five years, combined with record sales prices for existing properties. Those elements “created a perfect climate for new construction.”

“The big question on everyone’s mind is: Are we overbuilding?” Reay said. “In many markets, the new supply is simply making up for the lack of new construction from 2009 to 2013.”

He cautioned, however, that if RevPAR growth slows down or flattens, and if new supply keeps getting added, there could be increased pressure placed on older hotels as they struggle to compete. Going forward, Reay said it will be important for lenders and developers to carefully monitor the new hotel supply pipeline before jumping into the market…