Lodging Forecast: How Long Can Post-Recession Uptick Last?

Lodging Forecast: How Long Can Post-Recession Uptick Last?

San Diego Business Journal

Lodging Forecast: How Long Can Post-Recession Uptick Last?
By Lou Hirsh



San Diego County’s lodging and tourism industries have been on a tear for the past six years. Can they go for a seventh in 2017?

The local region in 2017 is expected to maintain its highest hotel occupancy levels seen in the last 30 years, at least matching its lodging performance of 2016, according to the latest forecast from San Diego’s RAR Hospitality Inc.

At his consulting and management company’s annual lodging industry forecast event in Carmel Valley on March 24, CEO Robert Rauch said barring an unforeseen terrorism-related or other “black swan event,” the national tourism economy should remain strong in 2017. The San Diego region’s tourism and lodging fundamentals generally fall in line with what’s happening nationally, and local metrics have generally been improving year-over-year for the last six years straight.

Rauch said the 2017 forecast calls for a regional occupancy rate of 77 percent — on par with 2016 — with an average daily room rate of $160 and revenue per available room (RevPAR) of $123. The room rate and RevPAR numbers, if they come to pass, would both beat 2016 metrics.

Rauch said the local region benefits in part from its strong “drive” market, with lots of visitors coming here by car, which has helped it rebound in the post-recession era more strongly than other tourism markets that rely more heavily on air traffic.

Continued expected job growth and a diverse economy create local opportunities for strong, year-round demand in the group, leisure and corporate lodging categories, Rauch said.

Conference panelist Alan Reay, president of brokerage and research firm Atlas Hospitality Group, said lenders have begun to tighten standards for new hotel construction, and other types of investors are becoming cautious nationwide amid concerns the market might overheat.

However, demand fundamentals in California generally remain strong, and San Diego County currently has one of the state’s biggest slates of new hotel rooms in various stages of planning — 72 hotels with nearly 15,000 rooms in the pipeline. While not all of those properties will get built, and some are many years from starting construction, there are currently no signs of overheating conditions in markets such as downtown San Diego, where several projects meeting pent-up demand were recently completed or are underway.

Experts said six San Diego County hotels with a total of 1,017 rooms opened in 2016. There are six hotels with 1,044 rooms scheduled to open in 2017.

Rauch said the recently completed World Baseball Classic generated an estimated 5,000 room nights for the local region. Several big events could generate up to 10,000 room nights in 2017, including April’s Red Bull Air Races, July’s Gold Cup Soccer Tournament, and October’s Extreme Sailing event.

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