July 30, 2024 | By Lilly Riddle

The first half of 2024 presented a nuanced landscape for hotel development in California, according to a recent report from Atlas Hospitality Group. A 10 percent increase in new hotel openings compared to the same period in 2023 indicated continued growth, but this was counterbalanced by a 15 percent decrease in the number of rooms available. This data, compiled by Atlas, reveals a complex interplay of factors influencing the state’s hotel industry.

In Southern California, Los Angeles County saw four new hotels open, including the 150-room Cambria Suites Burbank. However, the county’s overall pipeline of rooms under construction experienced a slight decrease. This suggests that developers are proceeding cautiously amidst rising financing and construction costs. The Inland Empire region presented a varied picture, with no new openings in Riverside County, while San Bernardino County welcomed two new hotels, including the 128-room Hampton Inn in Big Bear.

San Diego County bucked the trend of decreased room availability with the addition of the 179-room SpringHill Suites Chula Vista Eastlake. This project, along with the ongoing construction of the 1,600-room Gaylord Bayfront Hotel (the largest in the state), demonstrates a degree of confidence in the region’s long-term prospects. However, the overall economic climate remains a concern for developers throughout Southern California.

Northern California experienced a slower pace of development in the first half of 2024. Notably, San Francisco had no new hotel openings, but projects like the Waldorf Astoria, currently under construction, indicate anticipation of future demand, according to the report. Santa Clara County’s hotel pipeline remained active in the planning phase, with five hotels and 684 rooms in total under construction.

Sacramento County offered a positive counterpoint, with two new hotels opening, including the 179-room AC Hotel Sacramento. This, combined with a steady flow of projects in the planning stage, suggests that the state’s capital may be navigating the economic landscape with greater resilience than some other regions.

The mid-year survey data reflects an industry adapting to challenges. While the increased number of new hotel openings is encouraging, the decrease in rooms available and the prevalence of deferred or abandoned projects underscore the economic pressures faced by developers. These pressures include rising costs and the potential for decreased demand due to broader economic conditions such as high levels of construction and planning.

Looking ahead, the remainder of 2024 will be a critical period for California’s hotel industry, according to the report. The balance between new construction and the actualization of planned projects will be closely watched, as will the broader economic trends that influence travel and tourism. Despite the uncertainties, the resilience demonstrated in markets like Sacramento and San Diego offers a degree of optimism for the future.