California’s Hotel Construction Pipeline Slows in 2020
California’s Hotel Construction Pipeline Slows in 2020
By: Özgür Töre
California’s new hotel construction has slowed somewhat from the record-breaking pace set in the first half of 2019, according to the 2020 Mid-Year California Hotel Development Survey.
Atlas Hospitality, specialized in the sale of California hotels, released the results of the survey that reveals the total number of upcoming hotels in the California state.
The number of hotels under construction decreased by 17.1% (from 234 to 194), and the number of new rooms under construction declined by 19.9% (from 32,424 to 26,418). Thirty-five hotels opened in the first half of 2020, down just one from the thirty-six hotels in 2019, but with 22.5% fewer rooms (4,515 vs 3,500), according to the latest hotel development survey by Atlas Hospitality Group.
In planning, the number of new hotels and rooms increased by 9.0% and 5.7%, respectively. There were 1,246 California hotels in planning midway through 2020, versus 1,143 last year. Rooms in planning went from 155,782 to 164,676.
LOS ANGELES COUNTY
Only one hotel opened in Los Angeles County in the first half of 2020, the 24-room Prospect Hotel. Los Angeles County leads California with 49 hotels and 7,650 total rooms under construction. The largest is the dual-branded AC Hotel and Moxy Hotel in Los Angeles, both 410 rooms. Los Angeles County leads the Golden State in the number of hotels (286) and total reported rooms (42,484) in planning.
SAN DIEGO COUNTY
San Diego County added four hotels with 458 rooms; the largest was the 142-room Homewood Suites in Carlsbad.
There are 11 hotels with 1,238 rooms under construction. The 226-room Destination Hotel Resort in Oceanside is the largest under construction.
The county has 100 hotels (up 2%) and 16,125 rooms in planning (down 9.8%).
Four Orange County hotels with 524 rooms opened in the first half of 2020. The largest was the 208-room Staybridge Inn & Suites Irvine. Orange County has 15 hotels with 2,888 rooms under construction. The largest continues to be the 613-room Westin Anaheim Resort, which is also the largest hotel in the State under construction. Orange County has 68 hotels and 11,978 rooms in planning.
Seven hotels with 986 total rooms opened in Riverside and San Bernardino Counties; the largest was the 131-room Element Hotel in Ontario. Riverside County has 11 hotels with 1,248 rooms under construction; the largest is the 250-room Hotel Indigo Coachella. San Bernardino County has seven hotels with 879 rooms under construction; a 451-room San Manuel Casino Hotel in Highland is the largest.
Riverside County has 100 hotels with 14,392 reported rooms in planning. San Bernardino County has 49 hotels with 4,368 rooms in planning.
SAN FRANCISCO COUNTY
No new hotels opened in San Francisco County in the first half of 2020.
Five hotels with 858 rooms are under construction. The 250-room Luma Hotel at Mission Bay in San Francisco continues to be the largest. San Francisco County has 52 hotels and 6,312 rooms in planning.
SANTA CLARA COUNTY
Santa Clara had two hotels with 249 rooms opened.
The largest was the 144-room Hampton Inn & Suites at San Jose Airport. Seventeen hotels with 2,660 rooms are under construction; this is the second-highest county ranking in terms of the number of hotels under construction and third in the number of rooms, behind Los Angeles and Orange Counties. The largest hotel under construction is the 263-room M Social in Sunnyvale.
Santa Clara County has 75 hotels and 11,299 rooms in planning.
Two hotels opened with 227 rooms; the largest was the 120-room TownePlace Suites Sacramento Airport in Natomas.
Sacramento County has seven hotels with 732 rooms under construction. The largest is a 128-room Hyatt House in Sacramento.
Sacramento County has 34 hotels with 4,772 rooms in planning.
Fresno County had three hotels with 325 rooms open, led by a 114-room TownePlace Suites in Clovis. Three hotels with 361 rooms are under construction. The largest is a 151-room Courtyard by Marriott in Clovis. Fresno County has thirteen hotels and 1,340 rooms in planning.
Through the first six months of this year, California’s new hotel development has slowed from the record pace set in 2019.
With the onset of the Coronavirus pandemic and the huge impact it has had on the hotel business not only in California but throughout the U.S., has resulted in many planned projects being deferred or abandoned altogether. A number of new hotels that have been completed have simply delayed opening while others under construction are not pressuring their contractors to complete. We have also seen a number of hotels under construction default on their construction loans and enter into foreclosure/bankruptcy.
While no one can forecast just how long this pandemic will last, it is clear that the effects on the California hotel business will be felt for many years to come.
Atlas Hospitality is forecasting that the vast majority of hotel projects in planning will simply not get built. Developers are already looking at other uses, namely residential. For those developers that still want to move forward with new hotel development, they are going to find it virtually impossible to find lenders willing to provide construction financing.
If there is any good news, it is that for existing California hotel owners, they can be at least a little less concerned over the anticipated wave of new supply.