January 14, 2025

The year 2024 was a transformative one for California’s hotel industry, defined by a mix of contraction and resilience, according to the latest California Hotel Development Survey by Atlas Hospitality Group. While the number of new hotel openings declined sharply, several regions demonstrated their long-term commitment to hospitality growth, with major projects under construction and a robust planning pipeline.

The state completed 35 new hotels, adding 3,798 rooms to its inventory. This marked a significant 34 percent decrease from the 53 hotels and 6,280 rooms that opened in 2023. The decrease reflects a challenging economic climate characterized by escalating construction costs, high interest rates, and tightened lending practices. Collectively, these factors weighed heavily on new hotel developments, forcing investors and developers to reassess their strategies.

Southern California: A Tale of Leaders and Laggards

Southern California remained a focal point for hotel development in 2024, with notable activity in key counties. Los Angeles County solidified its position as the leader in the state, opening five new hotels totaling 607 rooms. However, this was a stark 56 percent drop in new room count compared to the previous year. The largest opening was the 150-room Cambria Suites in Burbank, while other additions included boutique and midscale properties.

Despite the slowdown, Los Angeles County continued to dominate in construction and planning activity, with 23 hotels (2,833 rooms) under construction and a significant 199 projects (27,457 rooms) in planning stages. Among the most anticipated developments is the 300-room Kali Hotel, Autograph Collection, in Inglewood, set to open in 2026.

San Diego County, another major hub, added just one new hotel in 2024: the 179-room SpringHill Suites in Chula Vista Eastlake. This represented a 33 percent decline in room count compared to the previous year. However, San Diego’s future looks bright, with 13 hotels under construction, including the 1,600-room Gaylord Bayfront Resort in Chula Vista—the largest project currently underway in California. With 91 hotels in planning, the county’s pipeline totals nearly 15,000 rooms, positioning it as an important player in the state’s hospitality sector.

Riverside County demonstrated robust growth in 2024, opening four hotels with 519 rooms—a notable increase from the 159 rooms added in 2023. The Thompson Palm Springs, a 168-room luxury property, was the county’s largest addition. Riverside’s future also looks promising, with nine hotels under construction and 123 projects (17,735 rooms) in planning. The 250-room Hotel Indigo in Coachella and the 449-room Hard Rock Hotel in Palm Springs are among the marquee projects in the pipeline.

Orange County and San Bernardino County experienced mixed fortunes. Orange County added two new hotels with 298 rooms, a 52 percent drop from the previous year, while San Bernardino County opened two hotels totaling 224 rooms, a sharp 72 percent decline. However, both counties maintained steady construction pipelines, with notable projects like the Hyatt Place Ontario in San Bernardino and the La Quinta Inn & Suites in La Habra.

Northern California: Modest Gains and Future Potential

Northern California’s hotel industry faced significant challenges in 2024, with San Francisco County continuing to struggle. The city reported no new hotel openings for the second consecutive year, underscoring the lingering impacts of pandemic-era disruptions and local market conditions. The Waldorf Astoria San Francisco, with 169 rooms, remains the only project under construction, highlighting the region’s limited short-term growth.

Sacramento County, by contrast, emerged as a bright spot. The county opened two new hotels, including the AC Hotel Sacramento, which has 179 rooms—the second-largest opening in the state. Sacramento also has four hotels under construction and 43 projects (5,829 rooms) in planning, signaling growing investor interest in the region.

Santa Clara County also saw modest gains, with the 127-room Home2 Suites San Jose Silver Creek being its sole opening. The county’s construction pipeline includes four hotels (557 rooms), with the 254-room Treehouse Hotel in Sunnyvale standing out as a major project. Although the planning inventory decreased by 12 percent compared to 2023, Santa Clara still boasts 71 hotels in the works, underscoring its long-term potential.

Challenges Reshape Development Strategies

The downturn in hotel openings can be attributed to several converging challenges. Rising construction costs and elevated interest rates made financing new projects increasingly difficult. Additionally, many lenders have stepped back from funding new hotel developments, citing higher risks in the current economic environment. As a result, developers are shifting their focus to acquiring existing hotels at discounted prices, often at costs below replacement value. This trend reflects a cautious but strategic approach to investment.

Compounding these issues, a growing number of projects have stalled mid-construction, with some developers defaulting on loans or declaring bankruptcy. These disruptions indicate the broader financial pressures facing the industry.

A Resilient Outlook for California Hospitality

Despite the immediate challenges, California’s hotel industry is poised for recovery and growth. The state’s extensive pipeline of planned and under-construction projects reflects sustained investor confidence in its hospitality market. Regions like Los Angeles and San Diego are leading the charge, supported by large-scale developments that promise to redefine the local landscape.

As the industry navigates economic uncertainties, the focus is likely to remain on high-value projects and strategic acquisitions. California’s diverse tourism base, coupled with its status as a global business hub, ensures that the hotel industry’s long-term prospects remain robust.