Santa Cruz Sentinel
Santa Cruz Hotels Hot: Lexington, Hyatt Place to Open Soon; Six in the Pipeline
By Jondi Gumz
SANTA CRUZ >> Santa Cruz County’s hotel sector is hot, with a trend of owners tearing down older properties to build new ones. Three hotels with 390 rooms are under construction right now, and six more hotels with 519 rooms are in the pipeline, according to Alan Reay, president of Atlas Hospitality Group, which tracks the industry.
Michael Tansy, a partner in the 128-room Lexington Hotel at 5030 Scotts Valley Drive, Scotts Valley, said he expects the hotel to open by September.
JP Construction of La Selva Beach began construction of the $21 million project in March 2015. At that time, completion was expected in 16 months.
Tansy explained via email to the Sentinel that the project was upgraded from a midprice market brand to an upscale hotel, necessitating changes to the interior design.
The 106-room Hyatt Place, a $25.4 million project at 107 Broadway a block from Ocean Street in Santa Cruz, is taking reservations for Sept. 1.
A standard king bed room with sofabed is available for $259, according to the hotel’s website.
Reay said hotel construction is booming statewide, with 26 hotels opening so far this year, a 53 percent increase, and hotels in planning growing 37 percent.
He said record sales prices for existing hotels and favorable construction financing have fueled the growth of hotels in California.
Sales of Santa Cruz County hotels are infrequent. One recent sale, the Scott Valley Hilton, took place in 2015.
For cities and counties, hotels provide ongoing revenue via room taxes, thus a more attractive development than housing projects.
Revenue has soared to a record $141 million in 2016 for 70 hotels in Santa Cruz County monitored by STR, which tracks the industry.
Compare that to 2009, the worst of the economic downturn, revenue was $71 million, based on 68 hotels in the county tracked by STR.
Room rates averaged $149 per night from January through June this year, up from $106 in 2009, according to STR.
Occupancy jumped from 51 percent for the first six months of 2011 to 66 percent for those six months this year, STR said, but double-digit increases in revenue from 2012 to 2015 eased back to a single-digit increase in 2016.
The leveling off “might be an early warning sign to developers and hotel construction lenders,” Reay said.
Near the beach in Santa Cruz, workers are prepping a site at 321-325 Riverside Ave. to build a 151-room Courtyard by Marriott, a $34.7 million project undertaken by Lotus Management of San Jose.
“They’re getting the site ready for construction,” said Kris Reyes, director of community affairs for the Santa Cruz Beach Boardwalk, who frequently drives by the property on his way to work.
To make way for new construction, three dated motels were demolished.
In June, the Santa Cruz County Council approved two hotels, both new construction replacing older accommodations.
Praful Patel plans to demolish the 32-room Sunset Inn, built in 1949 at 2424 Mission St. on the Westside and build 60-room three-story Hampton Court Inn designed by Santa Cruz architect Matthew Thompson.
Kiran Patel plans to demolish the 20-room Lanai Lodge, built in 1962 at 550 Second St. and facing the Boardwalk parking lot, and build a 60-room hotel designed by Eugene Sakai of Studio S Squared in San Jose.