CoStar
07/27/18

The Hotel Market Is Looking Good in L.A., but It’s Not All About Size
Development Remains Strong, Especially in the Downtown Core
By Karen Jordan

https://product.costar.com/home/news/shared/193746

‘If you build it, they will come,’ seems to be the mantra for hotel construction in California lately, and Los Angeles is leading the pack.

Los Angeles County is ahead of the rest of the state with 246 hotels and 37,682 hotel rooms in the pipeline this year. It is an increase of 21 percent and 24 percent, respectively, over last year, according to Atlas Hospitality’s 2018 Mid-Year California Hotel Development Survey.

The size of Los Angeles County does play a role.

The total number of hotels in the county probably equals San Diego and Orange County combined, according to Alan Reay, president of Atlas Hospitality Group said. However, there are also other considerations.

“There’s no question that the downtown Los Angeles market, with the tax incentives that the city has offered, has really spurred hotel development,” Reay said, adding that the planned expansion of the Los Angeles Convention Center has also factored in.

The proposed $1.2 billion expansion of the Los Angeles Convention Center would include expanding the JW Marriott Los Angeles LA Live at 900 W. Olympic Blvd.

While Reay said there is a “spattering of a lot of interest” in the South Bay, particularly Inglewood, due to the under construction NFL Stadium, nothing compares to downtown.

Matthew May, president of May Realty Advisors, agreed that demand in downtown is driving a lot of the growth. He also said the lack of new hotels in many markets allows for these hotels to take business away from older ones.

“New hotels are more niche oriented and are designed for a specific customer base,” May said via email. “Hollywood and downtown Los Angeles are the two areas with the most niche-style hotels at this time.”

Another factor is that there is a scarcity of land in other parts of Los Angeles outside of downtown, according to Reay. As a result, in the area around Los Angeles International Airport, some developers are coming in and converting office buildings into hotels, he noted.

One example is the 231-room Residence Inn on Century Boulevard that opened three years ago, converting a12-story office building to make way for the project. Next door, a dual-branded Homewood Suites and H Hotel Los Angeles Curio Collection by Hilton opened last year at 6151 W. Century Blvd.

More than a dozen hotels have opened this year so far in Southern California, including the 241-room NoMad Hotel at 649 S. Olive St. in downtown Los Angeles and the 105-room Kimpton La Peer Hotel in West Hollywood, according to Atlas Hospitality’s hotel development survey.