San Diego has been a standout this year in the state, not only for hotels under construction, but also for having the largest hotel opening in the state
By Lori Weisberg | lori.weisberg@sduniontribune.com
PUBLISHED: July 10, 2026 at 5:30 AM PDT
In a major departure from most of Southern California, San Diego County saw its hotel development double during the first half of 2026, compared to a year earlier, with more than 2,200 rooms under construction.
At a time when lenders and developers are still squeamish about moving forward with costy hotel projects, San Diego’s construction pace is a hopeful sign that the county remains an attractive destination for continued development, says Atlas Hospitality Group President Alan Reay, whose Orange County-based company just released its mid-year development report.
In all, 13 hotels accounting for 2,211 rooms were under construction this year, compared with 10 lodging properties composed of 1,106 rooms in 2025.
In Southern California, most counties saw the number of rooms under construction decline. Especially notable is that Los Angeles, the single-biggest county in the state, led San Diego by just 100 rooms, although it has 19 hotels under construction, compared with San Diego’s 13, according to the Atlas report.
Only two other Southern California counties experienced year-over-year increases in hotel development — Orange County, which went from five rooms to 329, and Santa Barbara, where the number of rooms under construction rose from 37 to 431, Atlas reported.https://datawrapper.dwcdn.net/DNuhA/1/
The mid-year report also calls out San Diego for having the single-largest hotel opening during the first half of the year. Nowhere in California this year was there a newly constructed hotel that was larger than the 148-room Element by Marriott hotel, which opened last month in Mission Valley. A year earlier, it had the same distinction, owing to Chula Vista’s 1,600-room Gaylord Pacific Resort & Convention Center opened, which easily eclipsed all other openings during the first six months of 2025.
“We’re running into the same things that we’ve been talking about before — high construction and labor costs and high interest rates, as well as more distress sales in California,” Reay said. “But when you look at San Diego, it’s leading the entire state with the number of hotels opened in the first six months of 2026 — four hotels with 333 rooms — and when you look at hotels under construction, there are 13 hotels, with 2,211 rooms, second only to L.A.
“I think what this really tells you is that, No. 1, deals for new hotels still make sense in San Diego County, and that’s because people see the economy as strong, and the demand for new product is still there. But No. 2, you’ve still got to be able to get the construction financing. So I think what we’re seeing with this latest survey is that not only are developers really bullish on San Diego County, but the lenders are as well.”
In terms of new hotels that opened this year, they ran the gamut from the extended-stay model like the Element Mission Valley and the 122-room WoodSpring Suites in Santee to CH Projects’ 31-room Baby Grand, a highly designed boutique hotel in Coronado.
While financing remains challenging for new hotels, the Element’s developer, Driftwood Capital, had the advantage of property it already owned in Mission Valley. The Element sits on a space that previously accommodated surface parking and a permanent 5,000-square-foot tent structure for its next-door neighbor, a full-service Marriott, also owned by Driftwood.
Daniel Katz, Driftwood’s vice president of asset management, told the Union-Tribune last month that securing construction financing remains quite difficult, but noted that his firm is aggressively pursuing new development, having just opened its San Diego property, with two other projects underway in Florida.
Statewide, 21 hotels opened in the first half of 2026, a decline of 42% compared with the same period last year, Atlas Hospitality reported. Those hotels represented 63% fewer rooms — 1,988 compared with 5,369 in the first six months of 2025.
However, the number of hotel rooms under construction rose 16%, led by Southern California. That compares with the 100% increase in just San Diego County.
Not surprisingly, given the still uncertain market for hotel development, the volume of hotel projects across the state that are still in the planning stages fell this year, compared to a year earlier, the Atlas survey reported.
“What we’re seeing, not so much in San Diego, but in other other areas are a lot of foreclosures — L.A. County, San Francisco, San Jose — and that’s really causing lenders to look twice at financing existing hotels,” Reay said. “They’re almost all saying we don’t want to finance any new construction. That’s not really what we’re seeing in San Diego.