The San Diego Hotel Market consistently leads California in occupancy, with a 12-month average of 73.8% through June 2025. RevPAR grew by 2.4%, outperforming the national average of 1.5%, though growth has slowed due to weaker government-related travel.
My forecast for the balance of 2025 and all of 2026 is steady 2% – 2.5% RevPAR growth, with flat occupancy and modest rate growth. This is due to new supply, a slight improvement in international travel, and steady group, business, and leisure demand.
Leisure, Group, and Business Demand
- Leisure travel remains the primary demand driver (~55% of room nights), but is showing modest summer declines as cost-conscious consumers opt for vacation rentals or alternate destinations.
- Group and convention travel accounts for ~30% of stays. Comic-Con remains a major anchor, with 135,000+ attendees expected this weekend (July 24, 2025).
- Weekday business travel is stabilizing, driven by industries such as life sciences, healthcare, academia, communications technology, and military-related sectors.
Submarket Standouts: Northeast/Escondido posted over 8% RevPAR growth.
Image Source: CoStar
Hotel Development Activity in San Diego
1,528 rooms in 11 hotels under construction (2.3% growth rate); most in South/East San Diego, led by the 1,600-room Gaylord Pacific Resort, which opened in May 2025. Other major hotels include the Jamul Hotel Casino (200 rooms) and Le Méridien Downtown (231 rooms).
Image Source: Costar
With the continued high tariffs and construction costs in 2025, hotel development is likely to remain a challenge, especially if interest rates do not decline.
Economic & Tourism Impact
Visitor spending reached $10.1B last year; attractions like the San Diego Zoo, SeaWorld, and Legoland draw 8M+ visitors annually. The Defense sector supports 350K+ regional jobs, and the Navy’s Pacific focus bolsters San Diego as a strategic hub.
The Life Sciences cluster, anchored in the Golden Triangle (La Jolla), drives medical tourism and weekday business travel. Comic-Con 2024 generated over $160M in direct and indirect spending, reaffirming the city’s convention power.
San Diego collects an additional 3.25% TOT on hotels near downtown to fund the convention center expansion, not plug a city budget deficit gap. Amazing that city leadership allowed this collection of guest tax dollars with no notice, no expansion, no plans and pure political sleight of hand. Many hotels outside downtown—some 20+ miles away such as our hotels—receive little direct benefit. Guests face an added 2.25% tax at many of these properties that are 20 miles away. With average rates exceeding $200 even at mid-market hotels, every dollar matters in today’s price-sensitive environment.
On top of that, hotel minimum wage is expected to rise to $25/hour if the bill passes later in 2025. While wages should reflect the cost of living, operators are left wondering: who ultimately bears that cost—owners, operators, or guests?
What’s Next?
Our next hotel report will feature other markets around Southern California. Sign up for my newsletter, Hospitality Innsights, to be the first to read it. Good luck this summer, and I hope to see you at one of these upcoming hotel events soon:
- Women in Tourism & Hospitality, September 18-19
- San Diego County Lodging Association, September 25
- The Lodging Conference, October 6-9
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