July, 30 2024 | Excerpt from CoStar

Twenty-two hotels opened in California during the first half of the year, according to a midyear survey, highlighting the ongoing challenges hotel developers face across the U.S. and in California in particular.

Atlas Hospitality Group’s California Hotel Development Survey Mid-Year 2024 reports that the 22 openings were an increase over the 20 that opened in the first half of 2023, but the 2,289 rooms that opened were a 15% year-over-year decrease. While the number of hotels in construction remained at 122, the number of rooms in construction dropped from 16,321 to 15,468.

What stood out to Alan Reay, president of California-based Atlas Hospitality, is significant increase in the amount of projects in the planning phase that have been abandoned or deferred, though be believes that’s understandable considering what’s going on with financing and other factors.

On top of that, the number of projects that have broken ground and are under construction that have completely stopped is also up higher than previously seen, he said. There are about four or five hotel projects in the Coachella Valley that have stopped construction. There are another three or four in Los Angeles, and there’s also some in Northern California. Some projects are under foreclosure.

The Hotel Indigo project in Coachella is a well-known hotel project that was foreclosed on and sits vacant because the lender isn’t doing anything with it, Reay said. In contrast to that, Hall Financial foreclosed on a hotel project in Palm Springs and continued with its construction. It’s scheduled to open later this year.

“In that particular case, the lender did look at selling the property, but they looked at where the offers were coming in at and said, ‘Hey, we’re going to go ahead and finish this ourselves,’” he said.