California Hotel Development Continues Record Pace

    By Alan X. Reay, President, Atlas Hospitality Group

    Atlas Hospitality Group recently published its California Hotel Development Survey 2019 Mid-year; the results are striking.

    Through the first six months of 2019, 36 new California hotels opened. This compared to 26 over the same period in 2018.

    The total number of new rooms under construction jumped 25% year-over-year, from 25,872 to 34,424. There were 234 new hotels actively in progress, a huge increase to the current existing inventory.

    What is causing the record increase in California hotel construction?

    The answer is a combination of factors:

    • California hotels have enjoyed a 10-year run of increasing revenue and profit.
    • Existing, older Golden State hotels are selling at record median prices per room. In many instances, at or above replacement cost.
    • The availability of attractively-priced construction financing. For many years, lenders shied away from new hotel construction. Their pockets are now wide open.
    • Cities that offer tax incentives for hotel developers, i.e. Los Angeles and Anaheim.

    From a brand standpoint, Marriott continues to dominate California hotels under construction, with 71 hotels and 11,200 total rooms. Independent properties follow, with 55 hotels and 6,932 rooms. The Hilton brands are third, with 49 hotels and 6,147 rooms.

    2018 was a record-breaking year for California hotel development, and as we predicted, 2019 is on pace to eclipse it.

    Lenders and developers continue to be very bullish on new California hotels, as they see a very positive long-term outlook for the Golden State. They are also encouraged by the state’s Rev PAR increases, as compared to the rest of the country.

    The rapid rise in construction costs has done very little to dampen the supply of new California hotel rooms. Developers continue to push forward, and lenders are keeping the funds flowing. 

    If you would like a copy of the Atlas Hospitality Group California Hotel Development Survey 2019 Mid-year, please send a message to Atlas President Alan X. Reay at alan@atlashospitality.com.

    Atlas Hospitality Group, which specializes in the sale of California hotels, was founded by Alan X. Reay in 1997. Since its inception, Atlas has sold more hotels in the state than any other brokerage firm. The experienced and knowledgeable professionals at Atlas Hospitality Group strive to see investment objectives become a reality. We utilize the latest technology to keep pace with the rapidly changing market. We are not only wired to numerous sources of information, we are also recognized as an information source on the California hotel marketplace. By maintaining an exclusive and extensive database of individuals and institutions of the hospitality industry, we are able to effectively match buyers and sellers in a quick and efficient manner. This strategy ensures that there is always instant and consistent communication between brokers within the firm, as they share vital information with each other. Visit our website at www.atlashospitality.com.