Hospitality: Luxury Styles

Although demand for hotel rooms in Los Angeles County is mounting, construction is increasingly limited to premium, less affordable options.

By Gina Hall

March 30, 2026

Los Angeles is preparing to host this year’s FIFA World Cup, the 2027 NFL Super Bowl and the 2028 Olympic and Paralympic Summer Games.

Yet the region’s hotel pipeline is slowing as rising construction costs, higher interest rates and short-term rentals restrain new development for many affordable accommodations.

According to Atlas Hospitality’s end-of-year 2025 Hotel Development Survey, Los Angeles County had the highest number of new hotels open in the state, with seven properties completed. The county also leads with 18 hotels and 2,172 rooms under construction, with the Kali Hotel and Rooftop, Autograph Collection near SoFi Stadium among them. There are 138 hotels representing 20,557 rooms in the planning pipeline.

The pipeline is concentrated in specific segments and submarkets. Based on an October report out from Matthews Real Estate Investment Services, builders have been primarily focused on upper midscale and upscale segments concentrated in downtown Los Angeles, Hollywood, Burbank, Glendale and the Los Angeles International Airport corridor.

These areas are “supported by ongoing revitalization efforts, entertainment expansion, and proximity to major demand drivers such as SoFi Stadium and LAX,” according to the report.

Los Angeles is one of the U.S.’s highest-performing hotel markets for both occupancy and average daily rate (ADR), according to Hotels Online. The first quarter of 2025, the revenue per available room (RevPar) was up nearly 5%, driven by demand tied to the January 2025 wildfires in Pacific Palisades and Altadena. However, the 12-month average revenue per available room for the year was flat, “signaling a clear deceleration from earlier momentum,” the report noted.

“Los Angeles County typically leads the market in new hotel development simply because of the sheer size of the market,” said Alan Reay, president of the Irvine-based Atlas Hospitality Group, which specializes in hotel brokerage, investment and advisory services. “But in the mid-price and budget segments, we’ve lost a lot of supply.”

Uneven market growth

The focus on high-end development is still contributing to uneven growth in the market.

According to Hotel Online, L.A. hotel’s average daily rate is expected to grow in the near-to-medium term supported by the World Cup, Super Bowl and Olympic games. And based on real estate data and analytics firm, CoStar Group, only about 200 hotels nationwide consistently have ADRs above $750. The Los Angeles metro area has more than a dozen properties in this range, and according to CoStar, “is well positioned to continue capturing high-end leisure and international demand.”

Hotel Online data predicts that the upcoming high-profile events will generate increased ADR, with RevPAR projected to grow by an average between 3% to 5% annually through 2028.

Jones Lang LaSalle Inc., a global commercial real estate services firm, released a recent report noting that “2025 hotel operating performance exemplified the K-shaped recovery with RevPAR for luxury properties increasing by 3% over 2024, while RevPAR for midscale and economy segments decreased by 2.8% and 4.4%, respectively.”

The firm noted that this performance split “reflects changing consumer preferences and spending patterns, with high-income travelers driving continued premium segment outperformance.”

This divergence also highlights a broader structural shift within the hospitality sector, with growth concentrated at the top end of the market. Higher-income travelers, including international visitors, support luxury and lifestyle properties, while price-sensitive travelers face fewer options as midscale and economy hotels decline.

The Aman Hotel in Beverly Hills is one such luxury property under construction and set to open in 2027. The 78 all-suite hotel is part of the larger One Beverly Hills that will connect the Beverly Hilton and Waldorf Astoria with 10 acres of botanical gardens. It will be the first Aman hotel, branded residences and exclusive members club on the West Coast.

However, this loss of affordable hotel inventory and limited new construction might squeeze travelers as major international events approach. The decline in midscale and budget options may have a more immediate impact on pricing and accessibility for travelers.

“People coming for the Olympics and the World Cup are definitely going to find it very costly to stay in Los Angeles,” said Reay.

Rising labor costs and elevated interest rates rank among the most significant headwinds facing hotel operators and developers. According to a December report from North Hollywood-based XL Construction, general construction costs have been rising from 4% to 6% annually in California. That number has risen as high as 8% with the ongoing shifts in tariffs.

“A lot of projects that were in planning have either been deferred or abandoned altogether,” said Reay. “The cost of construction has really jumped, largely because of labor, insurance and tariffs impacting furniture and fixtures coming from China.”

Varied by geography

The Los Angeles hospitality market also varies significantly by geography. Coastal and leisure-driven markets have generally outperformed during the recovery from the Covid-19 pandemic, benefiting from tourism and international travel, while downtown Los Angeles continues to lag due to slower recovery in corporate and convention demand.

Secondary markets, such as Pasadena and Long Beach, are increasingly drawing attention from investors and developers looking to capitalize on shifting demand patterns and proximity to event venues without the same level of saturation seen in traditional urban cores. Long Beach anticipates the opening of the 31-story Hard Rock Hotel in 2027 with 429 rooms. It will be the first new full-service hotel in the city in 30 years.

Pasadena also recently saw a rare addition to its aging hotel stock. That’s the AC Hotel Pasadena, which is part of the Marriott International, Inc. portfolio, opened in April 2025. Amar Shokeen, chief executive of Welcome Group, an El Segundo–based hotel owner and developer, oversaw the project that features 194 rooms located in Pasadena’s Playhouse Village.

“Most of the hotels in Pasadena had been built a long time ago,” Shokeen said. “This was the first new hotel in over 20 years with a modern concept.”

The project reflects a broader push toward lifestyle-oriented properties designed to appeal to younger travelers, with smaller rooms and modern finishes. The approach aligns with shifting consumer preferences that prioritize connections to local communities over traditional full-service amenities.

Shokeen said the city’s cooperation played a key role in bringing the project to completion. “They approved everything on time and showed up for every inspection,” he said. “We were able to complete construction in 18 to 24 months. That kind of cooperation is rare.”

Still, Shokeen emphasized that the project stands out in an otherwise challenging environment for new development. “We were one of the only hotels built recently,” he said. “Construction in the hospitality business is extremely difficult right now.”

Not from the ground up

A growing number of investors are turning away from ground-up construction in favor of acquiring or repositioning existing properties. Many owners are focusing on upgrading to meet evolving guest expectations and remain competitive in a crowded market.

“We’re seeing a lot less building of new hotels and a lot more repositioning of existing ones,” said Alex Kuby, associate principal at Dyelot, a Long Beach–based hospitality design and development firm. “The cost-to-benefit ratio on repositioning existing assets is far more favorable than new construction.”

Kuby noted that a significant portion of the region’s hotel inventory has not been updated in decades, creating a disconnect with modern travelers and presenting opportunities for reinvestment.

“A lot of hotels haven’t been refreshed since the (1970s or 1990s), and you feel that as a disconnection from the modern-day lifestyle in Los Angeles,” he said.

That shift toward repositioning is also playing out in transaction activity. According to Atlas Hospitality’s most recent hotel sales data, Los Angeles County saw a total of 41 hotels sold in 2025, a 14% increase from 36 transactions in 2024, while dollar volume rose 52% to $736.1 million. The median price per room increased 16% to $185,000. The largest transaction was the lender-initiated sale of the 397-room Line Hotel in Koreatown for $68 million, reflecting a broader trend of distressed and value-driven deals entering the market.

“There’s been a spike in distressed deals in Los Angeles,” Reay said. “If I can buy an existing hotel for less than it costs to build new, that really pushes investors toward acquisitions rather than development.”

Atlas Hospitality’s report noted that distressed and lender-driven outcomes represented an outsized share of transactions in 2025, helping sustain overall sales volume even as pricing metrics softened. By yearend, a total of 259 hotels had changed hands statewide, underscoring continued investor appetite for well-priced assets.

Regulatory hurdles underway

Then there are the regulatory issues facing the industry. According to the Los Angeles Times, in February the Los Angeles City Council approved a June ballot measure that might increase the hotel tax ahead of the 2028 Olympic games. The measure suggests a temporary 2% increase to the city’s 14% transient occupancy tax, then drop to a 1% increase in 2029.  The temporary 2% increase would generate $44 million per fiscal year in tax revenue.

The proposed increase has come at the same time as hotel worker minimum pay is increasing, which is predicted to reach $30 per hour by 2028. According to HospitalityNet, the upticks in minimum wage have resulted in multiple LAX-adjacent hotel renovations being paused or canceled, several hiring freezes, and multiple LAX-area hotels listing for sale.

“Industry groups warn that the new mandates may lead to hotel closures, particularly among independent, budget and economy-tier operators,” the HospitalityNet report said. “This isn’t just a wage issue; it’s a fundamental challenge to the economic model that’s kept airport-area hotels viable for decades: high occupancy, low rates, and lean operations.”

Pressure from short-term rentals

Consumers concerned with inflation are looking for affordable alternatives such as short-term rentals. These short-term rental platforms, such as Airbnb Inc., add pressure to the traditional hotel model during peak travel periods when operators rely on higher rates to offset slower seasons.

Hosts in the Los Angeles area earned nearly $1.2 billion in 2023, a scale that industry operators say is increasingly diverting demand from traditional hotels, according to Airbnb.

“When there’s demand in the market, Airbnb sucks a whole lot of life out of it,” Shokeen said. “When New York restricted Airbnb, we saw our hotel rates jump dramatically. L.A. hasn’t done that, and hotels are going to continue to suffer if nothing changes.”

The influence of short-term rentals is also shaping longer-term development trends across the region, reducing the urgency to add new hotel supply even as major global events approach.

“I don’t foresee an immense increase in new hotel development, more of a steady, incremental growth,” said Kuby. “There’s less pressure to build rapidly because of the volume of Airbnb and other short-term rental supply.”

Some analysts are more optimistic about the impact of the upcoming events.

JLL research shows that Super Bowl games contribute an average of 2.8% to annual market RevPAR and World Cup host cities are positioned for even greater impact due to the tournament’s long duration and international appeal. The research indicates that many host cities could experience mid-double digit RevPAR growth in 2026.

“The World Cup represents a transformational opportunity for U.S. hotel markets,” said Dan Peek, Americas president of JLL’s Hotels & Hospitality Group.

Still, industry observers caution that these events are unlikely to fundamentally reshape the long-term supply landscape. Instead, they are expected to amplify existing trends: driving short-term spikes in pricing and demand while leaving underlying constraints such as high costs, limited development timelines and shifting consumer preferences largely unchanged.

For Los Angeles, the path forward may be less about rapid expansion and more about strategic adaptation by developers, operators and policymakers.