San Diego Lodging Forecast 2025
By Gary London and Bob Rauch
The real estate market in San Diego and nationally has been in recession. The cost of money, as well as the other factors of production – land, labor, and materials—have been prohibitively expensive. As such, while major projects are under construction and completed, a relative dearth of new projects is expected for the coming year. The good news is that inflation is way down, the cost of capital is receding, and underwriting standards should be loosened.
However, real estate and land use move at a snail’s pace, so while the trend is good, there will not be many new “shovel in the ground” projects coming in 2025. The region is probably two years out for most projects in the planning stages. After the San Diego lodging overview, below is a brief tour of what is happening and what to expect throughout the region in the coming year.
San Diego Lodging Overview
San Diego’s economy is generally supported by three primary sectors: defense, tourism, and technology/innovation. These three sectors are the largest in San Diego and account for over 30% of the market’s employment. This content should serve you well when drafting your Business Plan for 2025.
Key Economic Highlights
According to Lodging Analytics Research & Consulting (LARC), local Gross Metropolitan Product (GMP) is forecast to increase at a 1.8% compound annual growth rate (CAGR) through 2028, ranking it 43rd among LARC’s 62 markets. San Diego’s economy is diversified, with no one sector accounting for over 23% of GMP. Since the pandemic concluded, the fastest-growing sectors have been Leisure and Hospitality and Transportation and Utilities. Population growth has begun to slow across the MSA. Positive net migration trends have started to shift, and the population is expected to be flat through 2028.
By year-end 2024, San Diego hotels are forecast to see a RevPAR increase of 1.0%, according to CBRE. This results from an estimated minor increase in occupancy of 0.1% and a 0.9% gain in average daily room rates (ADR). The 1.0% advance in San Diego RevPAR is less than the national projection of a 1.2% increase. Year-end San Diego RevPAR will be 22.4% greater than the 2019 year-end RevPAR level of $125.61. Leading the way in 2024 RevPAR growth is the middle-priced segment of San Diego. Middle-priced properties are forecast to attain a 1.9% gain in ADR, but suffer a 0.1% decrease in occupancy, resulting in a 1.8% RevPAR increase. Upper-priced hotels are projected to experience an ADR growth rate of 0.2%, along with a 0.2% gain in occupancy, resulting in a 0.4% RevPAR increase.
Also according to CBRE, San Diego RevPAR is expected to grow 2.8% in 2025, better than the forecasted growth rate for 2024. Prospects for RevPAR growth in the upper-priced segment (3.2%) are better than in the lower-priced segment (0.3%). San Diego market occupancy levels are expected to range from 76.0% to 77.5% during their 5-year forecast period.
Tourism Economics and the San Diego Tourism Authority Forecast Data
Tourism Economics (TE), in conjunction with SDTA is forecasting the region to finish 2024 up .3% in occupancy, or essentially flat from 2023. Average rates will finish up .8% with RevPAR up right around 1%. 2025 shows modest improvement to occupancy up 1% and average rates up 1% for an increase in RevPAR of 2%. Some good news is that there is almost no new supply, and the Gaylord, with 1600 rooms, will be a demand driver for the region and is not likely to compete with individual hotels—certainly not to the extent that another downtown hotel with 1000 rooms would be.
The occupancy rate in San Diego County was 76.8% in 2019 and is headed toward 74% in 2024, up from 73.7% in 2023. Average rates were $166.44 in 2019 and is headed toward $212, up from $210.02 in 2023. However, the costs of operations are also up wildly! Ergo, despite occupancy levels approaching 2019 levels and growing average rates by nearly $50 in five years, costs are high enough to keep profits at or below five years ago. Since San Diego has stabilized, we will show 2019 numbers for comparison, but the real key is that 2024 to 2025 will be up somewhere between 1-3% in RevPAR.
Prediction for 2025 – 74.3% at $214
San Diego CBD
The post-COVID period has not been kind to San Diego CBD’s commercial inventory. Reported vacancies in the office market are officially pegged at around 25%, which in itself would be the weakest market, perhaps ever. Yet, the actual number might be closer to 50%. This is compounded by a first-in-this-century explosion of new office space now coming online, primarily in three mega projects (The West, IQHQ, and Horton Plaza). When all projects are completed, there will be well over three million square feet of added inventory.
However, across all sectors of office employment, companies are downsizing their office space requirements to meet the sticky post-covid working habits of at-home workers or some variation of home and office. It all translates to compressed demand. The primary beneficiaries will likely be the newer projects at Downtown San Diego’s west end. The B Street corridor buildings have the most to lose, as they will be “cannibalized,” a market result of the newer buildings unlikely to lure new tenants downtown.
To add complexity, the apartment market has reached peak rental demand and is now showing occupancy slippage and some decline in lease rates. Combining that with the high costs of financing, labor, and materials and substantially more stringent underwriting requirements, there is sure to be a stop to the boom of new residential construction. The Padres are winning, and downtown has a stable and substantial restaurant and entertainment scene. But these are the dog days of CBD real estate.
The hotel market remains strong; however, a limited number of products are coming online. Since 2019, supply has been slightly up, while demand has been slightly down. Occupancy in 2019 was 80.9%, and in 2024, it will likely finish at 77%. Average rates were $208.08 in 2019 and will likely finish at $260 this year. 2025 should show a small boost toward 2019 occupancy levels as group business returns. Bookings for 2025 are pacing down 3% year-over-year, but beyond 2025, trends are robust, with 2026 year-over-year pace up 9%, 2027 flat, and 2028 up 25%, according to LARC.
Prediction – 78% at $265
Mission Valley
Mission Valley feels like one long construction site, as numerous apartment projects have recently been completed or are under construction along the north side of the I-8 corridor. Along Friars Road, the large Hines master plan, called River Walk, is on temporary hold. The project will eventually add thousands of residential units and attractive supporting commercial along the trolley line. But not so fast, as Hines recently announced that shovels are down for perhaps the next three years. But once it starts, it will be transformational to that corridor.
The owners of Fashion Valley shopping center, Simon, announced their intent to demolish Penney’s structure on its west side and add over 800 residential units at that location and the adjacent parking lot. Not to be outdone, Lowe has purchased Mission Valley Center and will also add a similar number of residential units, although they are not currently planning to eliminate any retail. A Home Depot is about to be constructed on the south side of the I-8, north of Mission Center Road, the first of several projects along that road that will replace old structures and businesses. Many projects are in the works, although no public announcements are yet.
This submarket has seen more renovation than new supply growth. Occupancy in 2019 was 78.2% and will finish 2024 at around 77%. Average rates in 2019 were $127.09 and will finish 2024 at around $164.
2025 Prediction based on a solid reliance on leisure travel – 77% @ $167
San Diego North City & County
The healthiest real estate market in the region is San Diego’s north county, although it is less dynamic than other areas. Real estate values have gotten higher, and demand is exceptional, particularly among the elite coastal cities, including Del Mar, Solana Beach, and north through Carlsbad. While not imminent, the Del Mar Fairgrounds lays the groundwork for intensive redevelopment, but initiation is probably some years away.
Multiple projects have been completed or in process over the past year, including a new soccer stadium in Oceanside, completion of scientific and tech buildings in Sorrento Mesa and Torrey Pines, some new housing developments in Oceanside, and the continued buildout of the university community in San Marcos. There is virtually no activity in the unincorporated north county and not much along the inland I-15 corridor in and around Escondido. This absence of development in this land-rich portion of the region must be cured by a more attentive policy focus, particularly by the County Board of Supervisors.
Further south in the UTC area, the prospective redevelopment of the Costa Verde center has been delayed by its acquiring developer, Alexandria, who is reconceptualizing the project from technology/life science-centric to residential-dominant. Its big neighbor to the west, the UTC mall, is expanding its footprint for more commercial space at the location of the old Nordstrom building.
UCSD has been in an expansion frenzy in both classroom and student residences. This is an entirely new and dense campus for old-timers who have not visited lately. More to come: The Chancellor recently announced the upcoming development of 7,000 student residences, designed to cure the pressure for student housing in surrounding communities, particularly University City. That neighborhood now has a new community plan, which will transform the community from suburban to urban when implemented over the coming decades.
In old La Jolla, there is a movement afoot to break away from the City of San Diego and form the City of La Jolla (but not UCSD!). The movement wastes time, as a proposal must pass through LAFCO and voters. It probably can’t make fiscal sense. And it most certainly doesn’t make political sense. In the meantime, the village of La Jolla is going through a quiet mini-development boom with several smaller mixed-use, relatively low-density projects, particularly along Girard Ave. and La Jolla Blvd. These are welcome land-efficient projects, and more will probably come over time along the commercial corridors in the village.
New supply is entering the market in Carmel Valley and has already entered Carlsbad and Oceanside. In 2019, occupancy in the UTC/Sorrento Valley market was 81.1%, and ADR was $186.61. The submarket should finish in 2024 at 78 % and about $224.
Prediction for 2025 – 79% at $228
La Jolla Coastal’s occupancy rate was 75.9% in 2019, with an average rate of $257.12 that year. 2024 will finish at about 71% and about $333.
Prediction for 2025 – 71% at $335
The Northeast submarkets of Escondido, San Marcos, and Vista had 72.7% occupancy in 2019 at $122.05. They should finish this year at about 74% at $161.
Prediction for 2025 – 74% at $163
The Northwest submarkets from Del Mar to Oceanside ran 72.3% occupancy at $177.72 and should finish 2024 at around 72% at $223.
Prediction for 2025 – 72% at $225
The I-15 corridor had occupancy levels of 74.2% in 2019 at a rate of $144.93. In 2023, occupancy was 75.7% at $181.19. In 2024, they should finish at about 76% at $181.
Prediction for 2025 – 77% at $185
Midway/Old Town/Airport/Point Loma
Two mega projects are still processing: NAVWAR and Sports Arena. Navwar is located about two miles north of Downtown on Pacific Highway. A developer has been chosen (Manchester) with the promise of developing a new high-tech U.S. Navy building and at least 8,000 residential units. Details are unavailable, but this project will transform this area over the next decade. The old post office site across the street has seen furious construction of apartments; the first phases are now open.
Further north, the long-neglected Sports Arena and Midway areas should see pre-construction beginning in 2025 for a new sports arena, approximately 4,000 residential units, and some commercial. That is likely to catalyze many new projects in this market, including infrastructure improvement to accommodate it. Construction continues at the airport, with the $4 billion terminal development being well-involved. It’s a solid anchor to this area and will inform growth and development in its proximity in the coming years. Top Golf is scheduled for construction on Harbor Island in the foreseeable future. The occupancy for this market was 76.9% at an average rate of $142.80 in 2019. In 2023, it was 73.6% at $182.84. For the year-end 2024, the market should finish at about 78% at $189.
Prediction for 2025 – 79% at $192
In Mission Bay, 2019 occupancy was 78.0% at $191.45, 2023 was 68.8% at $268.57, and this year should end at about 74% at $260.
Prediction for 2025 – 75% at $265
San Diego South and East
The long-awaited Gaylord Pacific Resort and Convention Center is slated for opening early next summer. This is the most impactful project, as its residual effect will be the development of adjacent commercial space on the old Rohr site and several announced projects nearby, including hotels and residential. It’s the central part of an even larger footprint, which will ultimately include thousands of residential units to its north and prospective new “blue water” industries to its south. These ancillary projects will take form this decade but not next year.
Meanwhile, the other significant south county activity continues to be the build-out of the Otay Mesa corridor at and near the border, which alternatively lies within the Cities of San Diego and Chula Vista and the unincorporated areas. A big South Bay hangup is the never-ending, never-solved Imperial Beach/Tijuana sewerage plant inadequacy, which has closed the beach and impacted the quality of life of residents, businesses, and visitors to that town. Some new federal funding has been allocated, so 2025 may be the beginning of a resolution.
San Diego’s east county remains relatively dormant. There are many proposals for new development and redevelopment (in El Cajon), but the general malaise in the real estate market has put proposals and transactions on hold. Next year may be the beginning of some recovery and activity. Santee struggles with what to do with its giant master plan, Fanita Ranch, which is in and out of the courts. The City wants to move forward, but significant opposition remains, which portends continued delays, probably through next year.
In 2019, occupancy levels in South and East Counties were 75.9%, and average rates were $102.25. In 2023, we saw 76.4% at $148.22. In 2024, we expect occupancy levels to finish at about 78%, at $153.
Prediction for 2025 – 78% at $158 (excludes the impact of Gaylord)
Top 10 Trends for the Hospitality Industry in 2025
While we wait for all market segments to return to 2019 levels, we are seeing shifts in the hospitality industry. These 10 trends will shape the next year of guest expectations, technological advancements, and business growth.
Sustainability
1-Sustainability toward a net-zero carbon footprint. It’s not like China and India will start doing these things, but 76% of today’s travelers want to do business with those who care about the carbon footprint and our environment. Have you ever been to a Coldplay concert? Chris Martin, lead singer of Coldplay, has been orchestrating sustainable, net-zero carbon events for years. The fans love it and even participate by pedaling on stationary bikes. Energy conservation and efficiency are paramount to sustainable practices. Transforming cooking oil into biofuel, adding EV charging stations, and reducing our carbon footprint are becoming more critical for today’s travelers. Most of today’s events and trade shows have a sustainability goal, with 85% of attendees preferring sustainable practices. Most large companies disclose their environmental, sustainability, and governance (ESG) information, though some are due to regulatory requirements.
Artificial Intelligence
2-Next-level or “cutting-edge” artificial intelligence (AI) will enhance customer service, provide hyperdynamic pricing, improve wellness options, and personalize beyond today’s practices. The next generation of AI is already here and being integrated into our technology. Chatbots can handle guest inquiries and sound human! AI is not replacing humans—it enables them to be much more productive and provide improved customer service while it completes mundane tasks. The key is in the prompt—we will get an intelligent answer if we ask a thoughtful question. The hotel and event industries can use AI for facial recognition, voice-activated tools, automated live language translation, smart floor-planning tools and automated task management. AI training is the third-most sought-after learning cited by employees. Leadership and Wellness were 1 and 2, respectively.
Personalization
3-Hyperpersonalization via Virtual Reality (VR) and Augmented Reality (AR) once we’ve acquired an opt in. We can leverage owned channels, like email and SMS, which give us more control, meet personalization expectations, deliver better ROI, and ultimately provide more opportunities to build relationships with our customers and prospects. This might include custom room amenities, tailored entertainment options, virtual reality tours, and AI-generated artwork or music. With the rise of remote work, hotels should offer packages that combine leisure with work-friendly amenities. Smart rooms and IoT (Internet of Things) integration are transforming the hospitality industry by enhancing guest experiences and improving operational efficiency via voice-activated commands to control room features like lighting, temperature, integrated entertainment systems, and mobile apps.
Health and Wellness
4-Wellness – Nutritious menu items, new yoga mats or exercise equipment, new educational programming, food and beverage events, and a spa or relaxation experience are all good starts. Food and Beverage Innovation, like offering unique and locally sourced food and beverage options, will attract food enthusiasts and support local communities. Nutritious meals and breaks in the meeting facilities and restaurants will get positive feedback. More and more guests want a healthier lifestyle when they travel. Encouraging movement, whether for a meeting, event, or individual travelers, will result in happier guests and attendees. Fitness now extends to recovery amenities such as white noise sleep aids, intravenous vitamin drips, and digital technology treadmills. Further, employees are very interested in wellness and mindfulness training.
Improving Profitability
5-Profitability by driving revenues with enhanced AI, revenue management, sales call tracking, and ancillary revenue creation, like adding healthier snacks in the lobby shop; Cutting expenses like energy, insurance, food, and labor (robotics, chatbots) and improving tax strategies. Biometric check ins and facial recognition for room access will enhance security and streamline the guest experience
while saving “check-in” labor. Voice-activated controls and smart devices in rooms will become more common, allowing guests to easily control lighting, temperature, and entertainment systems while saving energy. Robotics can enhance efficiency, reduce operational costs, and engage with guests. They can vacuum, deliver supplies, food, and beverages to rooms, and provide AI-enhanced customer service.
Deal Flow and Capital
6-Deal Flow and Capital will improve with lower interest rates, debt maturity, construction, renovations, sales, and refinances. Today’s market has over $100 billion in hotel debt maturing by the end of 2025. These loans are commercial mortgage-backed securities (CMBS) at low interest rates (4.5%+/-). Future buyers might prefer the “Moneyball” approach to hotel management and use more technology and fewer employees. With construction costs increasing, new supply will continue to be muted. Project start dates for construction and renovations are difficult at best. Supply-chain issues are not as bad as 2020-2022 but not good. 2025 might be remembered as the year of the deal.
Generational Shift in Travel
7-Tipping Point of Generations – there is a quantum shift from baby boomers and Generation X to Generations Y and Z. Brands are responding with more products, short-term rentals are competing more favorably, cruises, glamping, yurts and even the soft brands are competing with different and tech-savvy features. With the leisure market dropping off and corporate, group, and international business picking up the slack, these new guests prefer photo ops to the “no surprises at Holiday Inn” or the “consistency” of many brands today (that’s better than using the words “cookie-cutter.”) The expression, “this is not your father’s Buick” may resonate with people my age. Take note that today’s traveler is changing right now.
Trust, Ethics, and…
8-Storytelling is arguably the most persuasive sales tool in the toolkit. Every product needs a story, and today, a robot, AI, AR, VR, or any innovation can create a great story. So can trust and ethics—karma works when we repeatedly do the right thing. This past weekend, I trusted my airline and hotel, but my travel plans fell apart. I was flying to New York for a wedding, and my flight got canceled. There were no other flights since it was Labor Day Weekend. I tried to cancel my hotel room since I couldn’t get there. I ended up renting a car and driving to my destination, meaning I had no sleep before the wedding. Do I look that bad? It was this past weekend! Bottom line? The hotel accepted my cancellation, the airline reimbursed me for the trip, and I was on time for the wedding: trust, ethics, a bit of lost sleep, and some extra driving. And think about this presentation—we are telling a story supported by the data, not showing you the data, and hoping for engagement.
Digital Nomad Effect
9-Remote Work is here to stay in some form. This impacts business travel in a big way. While a healthy work/life balance for employees is good in many ways, it reduces travel and increases Zoom, Teams, or Google Meet calls. This hybrid or remote work changes the culture nurtured in yesterday’s corporate headquarters. It also changes the strength of the midweek when it comes to occupancy. The combination of leisure travelers and remote workers makes weekends stronger than midweek.
Women in Hospitality are Making Waves!
10-Women in Hospitality is a trend; have you noticed? There are more women in both operations and senior roles than ever before. In 1980, there was that rare woman in hotel operations. Most were in sales. Today, 58% of the hospitality workforce are women, and 34% of the leadership jobs in hospitality are women. While there remains a gap, groups like the Castell Project, San Diego’s Women in Tourism & Hospitality, and San Diego’s employers are narrowing that gap. This is all part of the shifting diversity of hospitality employees and executives. People of color represent 51% of hotel front desk jobs (split 50/50 between Black and Latino) but only 14% of leadership positions. That is all changing!
These 10 trends are shaping the 2025 outlook of the hospitality industry. While some of these trends are similar to my 2024 outlook, many shifts are still occurring so it is more important than ever to stay ahead of the curve.
8 Tips to Set Your Hotel Up for Success in 2025
Every fall, we embark on business planning for the following year. This year has included a highly unusual presidential race. Here are 8 items to put on your “to-do” list to get you to 2025 and keep you focused!
1) Complete your research.
Business plans for 2025 must be clear, concise, and straightforward and are most effective when done before completing a budget. Review macroeconomic data indicating a gradual economic turnaround with slow growth in 2025. Domestic leisure demand is a bit flat after exceeding 2019 levels; corporate transient and corporate group demand is up and continuing to reach 2019 levels. Review your trend report and competitive set information from STR and Kalibri Labs, which will indicate where you are vis-a-vis your competitive set and what costs are incurred by every reservation. Your table of contents should include primary macroeconomic data, hotel supply and demand, competitive environment, action plans, and expected results. The action plan details who, what, when, and all costs associated with each action. I recommend you keep it simple.
2) Develop a budget.
Budget accuracy depends on the determination to gather correct and current market data, so again, research! Once you have an in-depth understanding of 2025 market conditions specific to your property, your budget will streamline operations and create strategic opportunities for your hotel, ensuring that every dollar spent goes towards boosting your bookings, improving your reputation, and generating the highest possible returns. Don’t forget to budget for cybersecurity, IT, wage increases, and legal costs based on today’s litigious environment. Consider investing in artificial intelligence and robotics if you have not started down that path.
3) Coordinate multi-pronged marketing efforts.
Review the STR report, reports from TravelClick, and other market intelligence and market pace reports carefully. Ensure your email lists are updated for newsletters and blasts and that you comply with GDPR and CCPA in California. Meet with general managers and marketing team members of competitor hotels. Site tour each business and establish a referral program. If appropriate, coordinate a market review with your franchise marketing manager and discuss opportunities for digital marketing and pay-per-click.
Meet with key contacts at your brand, visitor bureau, and chambers of commerce. Qualify critical companies and individuals to create or update your email list. Business Journals also have great lists of top businesses and employers. Don’t forget to check your reservation system database for errors – compare it to the convention and event calendars to ensure peak periods are blacked out. Take advantage of your Cvent listing by promoting your meeting space and continuously creating and delivering “can’t-resist” content for your website and e-blasts. Post to social media at least twice weekly to “tell your story” and promote your property to domestic drive markets and any critical markets your travel partners encourage.
4) Create a public relations strategy.
Brainstorm and create possible press releases for the coming year and a public relations plan. Contact each segment specialist for your franchise sales staff and local tourism agency. This will help you see opportunities to promote your business at future segment-specific directories or sales missions. Naturally, if you are independent, you must ensure you have representation to compete in each market segment. The PR Plan is part of your “above-mentioned” action plan.
5) Implement a focused sales plan.
Take the time to pause and reevaluate your overarching sales strategy. Even though hotel sales processes have changed, thousands of RFPs are still flowing through the system. Create a lead form at the front desk. Review competitor websites and social sites, including Instagram, Facebook, and X. Look at all previous businesses and examine key marketing reports. Now is the time to strengthen community relationships and explore creative partnership opportunities such as space sharing or creating new experiences with local vendors. Be a lobby lizard at your hotel and talk to guests because this leads to guest loyalty and gives you timely insight into who travels!
6) Review your revenue management tactics.
Conduct rigorous benchmarking, prepare accurate projections, and develop a responsive new business mix — these are the pillars of sound revenue optimization and the foundation of a strong business strategy. Position your property in the proper channels with software and optimize rates for your unique location and rooms. As you increasingly provide guests with an authentic connection to your area, a well-configured hotel revenue system can help you optimize these strategies and boost revenue.
7) Address changing trends.
Remember that the world changes quickly as we develop this year’s plan. Our 2025 Top Trends article is now posted, and our Top 10 will be out later this season. Sustainability is a thing, and guests care about it. Sustainability is “meeting the needs of the present with innovative solutions without compromising the future.” Guests care about that and want an experience — this is where a story about your features and benefits is beneficial. Otherwise, our hotels are just places to sleep.
Mobile will continue to influence the industry, and other disruptive technologies will continue to be incorporated into brands’ guest offerings. Think Internet of Things (IoT), Artificial Intelligence (AI), Virtual Reality (VR), and facial recognition.
8) Integrate technology wherever possible.
It’s no surprise that digital technologies will power the future of the hospitality industry. When looking for productivity, the promise of AI is a reality and is here to stay. In our case, we are using robotics not to replace jobs but to make them more effective and efficient. Technology is also helping to keep everyone safe. For example, a room-service robot makes contactless deliveries to a guest’s room. Mobile ordering technology can also help convert traditional dine-in F&B outlets to takeout and delivery outlets to comply with social distancing ordinances.
Be resilient; each year is a blessing; enjoy the ride!
Marketing Strategy for Hotel Owners, Operators and Consultants
Hotel marketing in 2025 has become more advanced — walking a property with purpose can open our eyes
After the challenging years of 2020 and 2021, we saw a promising resurgence in 2022 with the advent of ‘Revenge Travel.’ This trend, coupled with the addition of corporate and group business in 2023, and now the return of international business, paints a hopeful picture for the future. Despite the slow supply growth due to the lack of lender appetite during the COVID era and the current high interest rates, we can look forward to a full circle next year when interest rates drop and all market segments return to 2019 levels or beyond.
Hospitality Marketing in 2025
In 2025, every facet of marketing must be deployed as both guests and hotel companies have become way more sophisticated. Michael Porter has always been considered the dean of strategy. His “Porter’s Five Forces” allows a business to analyze its position vis a vis a competitive set or “rivalry” with forces from new entrants, buyers, sellers, and substitutes. An academic exercise that pinpoints a hotel’s competitive position is well worth investing time. What are the dynamics of hospitality industry competition? The hotel industry has undergone a significant change whereby every brand has a sub-brand designed, in theory, for every possible type of guest. These guests range from economy to extended stay to luxury resorts and everywhere.
Today, we must focus on what type of guest we want for multiple reasons—one is price point, and another is guest type. Utilizing a combination of different channels, we should target the right guest for our property and, as revenue managers preach, “the right guest at the right time, at the right price, and via the right channel.” Social media platforms like Facebook, Instagram, and Twitter allow us to promote our hotels and provide more personalized customer service than ever before. These social media profiles are a key element that impacts organic search rankings for our businesses. With the advent of digital marketing, we’ve seen a quantum shift from hospitality as an art to hospitality as a science.
By laser-targeting guests, we can begin to develop customer equity. “Wow Customer Service” is truly the key to creating customer equity. A zero defects mindset will allow for one of the inferior service levels like basic service and, rather than that, provide “wow” customer service to ensure guests consider returning to our hospitality business. Whether the guest is interested in sustainability, great restaurants, nightclubs, sports, or walking trails, we can find something to enjoy about our properties.
Hotel Marketing is more than your “Marketing Department”
An up-to-date website that is easy to navigate and an optimized search engine is a good start. A clean parking lot with all lighting properly working provides an excellent first impression. Is our staff smiling with a cheerful greeting? Reservations must be in order—if we ask our front desk team member how many rooms are left to sell and they say, “I don’t know, let me check,” that is not good. All staff should be well-groomed, well-informed, and have that “hustle” that says, what do you need? I am here for you! Guests at breakfast should be seated in an extremely clean and sanitized environment with hot food “hot,” cold food “cold.” Quick summary for operators:
- Optimize your website and social media channels
- Light up your parking lot – safety first!
- Train your front desk staff
- Smile!
What else are Hotel Owners and Operators responsible for?
A great place to check these days is our social media—do promotions make sense? Are they up-to-date with regular postings? After walking the property, do we see debris on the ground at the end of the day? Was everything in working order in the bathrooms and public areas? Do we feel like there is someone in charge? In other words, do we feel like there is a management presence that ensures the property is operating at peak effectiveness? Try it—politely ensure it is fixed if your retail shop is not stocked well and your bathroom soap dispensers are empty. This is normal, but not following up will leave the team feeling nobody cares.
Not only is the Head of Marketing responsible for keeping tabs on social media and the website, but having an active presence from operations and management will make sure the guests are happy, which of course leads to happy reviews. Great reviews on TripAdvisor can be a make or break for a large group committing to your hotel for 2025.
Check out these other articles to stay ahead of the curve
Transforming Hotels with Artificial Intelligence – Operators Who Ignore New Tech Will Be at a Severe Disadvantage
Hotel Owner Strategy for 2025 – Thinking of purchasing a hotel? Read this first.
Hotel Owner Strategy 2025
By Robert A. Rauch
Some analysts argue that the cycle is “getting long in the tooth” this year since we have been expanding for over 45 months since 2021. Since the tourism industry is resilient and growing, success will be possible for several years. Further, 2025 will be somewhat prosperous with interest rate reductions, strong consumer confidence, a durable job market, and a relatively robust global economy. The election may impact these factors.
Purchasing or Retaining a Hotel
When considering the purchase or retention of a hotel, the quality of your team is of utmost importance. As a hotel owner, the role of a single operator in optimizing revenues and expenses, making sales calls, and managing the financial aspects of the business is significant. Therefore, thorough due diligence is necessary to ensure the hotel has the right management, brand, renovation, and business plan/budget. Hospitality, once an art, has now evolved into a science with the introduction of revenue management, distribution channel management, social media marketing, website development, artificial intelligence, robotics, and more. If you’re planning to build or renovate, you’ll need an architect, designer, contractor, lawyer, brand, management company, engineers, lender, and a competent operating team.
When purchasing a hotel, I advocate for a compelling narrative. A need for renovation, brand change, or management change can significantly boost the numbers. If you can implement all three changes effectively, it can be a game-changer. A strong market and a healthy market mix, coupled with a solid business base, can ensure operating leverage. Operating leverage is achieved when fixed costs are met, and additional revenues’ flow through’ to the net income line, potentially leading to a ‘home run’ investment.
Location Location Location
Five key areas can provide the framework for success: location, product, management, marketing, and financial structure. The location has everything to do with the submarket in which the asset competes. An area with substantial barriers to entry—government regulations, cost of land, or other barriers—is a safer bet than an area with no limit to the amount of new supply coming in. Moreover, location refers to the market demand generators. A strong market should include multiple demand generators, such as corporate, leisure, and group, which provide leverage for the operation as mentioned earlier.
Product – aka Choosing the Right Brand
The second strategy for success is the product, which might include choosing the right brand. Marriott International, Hilton, InterContinental Hotels Group (IHG), and Choice Hotels are four of the leading hotel franchising companies. The “verticality” of brands—i.e., Marriott’s 30+ brands and Hilton’s 20+ brands—makes the market very complex. Critical review points include system reservation performance, impact policy, recommendations from other franchisees, and support for the brand’s property and growth.
Today, Gen Z and millennial travelers are helping us discard some of the tried-and-true strategies of the past decade. Product quality is paramount to profitable operations, and independent boutique hotels enjoy significant success. This and brands desiring to expand have led to many new “soft brands.”
Marketing & Management of Hotels
The third and fourth strategies, marketing and management, can be the difference between being able to pay the lender or not. Some firms are good at marketing and driving top-line revenue. Others are good at management and controlling expenses. Some charge back their corporate overhead, while others charge only for direct property expenditures. Finding that balance between good marketing and management is hard, but it is essential. Interview a few firms and choose one that suits you best.
Financial Structure
Lastly, it is virtually impossible to succeed without the proper financial structure. Today, first mortgage money is typically low-leverage, averaging just 65% of the acquisition cost and less if it is a new development. This might generate a need for a second mortgage or mezzanine loan; since this money is at a higher risk, a premium is attached to the rate. Today’s structure may be 65% first mortgage debt at 7.5% interest, 15% mezzanine debt at 10%+ interest, plus 20% borrower equity.
A return-on-investment analysis will determine if the project will succeed. This is the most critical element in deciding to purchase or build. Today, many potential sellers have commercial mortgage-backed securities (CMBS) loans due in the next 12-18 months.
So, Should I Own a Hotel?
Many institutional funds and real estate investment trusts have invested in full-service hotels or the urban, focused-service/upscale lodging sector. This leaves an opening for entrepreneurs today to look at turn-around opportunities or more focused-service hotels, perhaps in secondary markets.
Some critical tenets for success are required, including persistence, hard work, and honesty. Avoid mediocrity, move quickly with reversible decisions and slowly with non-reversible choices, seek out committed people, review accountability for everything, and do not be a spectator—get in the game!
So, if after reading this you feel like today requires too much work as a hotel owner, sell—you should get a reasonable price! Now, all that is needed is the goal and a set of action steps to achieve it. If the entrepreneurial spirit lifts you, go for it! Have a great 2025!
Will 2024 Go Up, Down or Sideways for Hoteliers?
This article first appeared on HNN.
US Presidential Election One Big Factor Outside of Industry’s Control
2024 is an election year, but this one is unusual. Both likely presidential hopefuls have such low ratings that more than half the country would like to see them disappear. Most election years have been kind to our industry — 2008 was an exception. So, what is in store for us?
Interest rates will come down albeit slowly; transactions will increase due to lower interest rates and the billions of dollars of hotel debt coming due next year; and the U.S. presidential election will be the most expensive and hotly contested election ever.
Additionally, the remote worker conundrum of a hybrid workweek of three days in the office and two days out might become normal. Will that improve group business? Strong group demand coupled with stronger corporate individual travel would bode well for our industry.
With lower interest rates, it will get very interesting in the transaction market. Remember, many hotel loans will come due in 2025 — preparing for that will consume owners, operators and brands alike.
Revenue Growth
Beginning with revenue drivers, leisure travel seems to have peaked; and business travel has certainly come back but the remote office worker has kept the numbers below 2019. Group business is back, but not quite to 2019 levels; and international business is likely to come back from April to October this year.
Consumer sentiment is getting much better. This year will likely require better technology, powered by artificial intelligence and greater personalization of the guest experience. These require superior knowledge of the data in our hotels, something that many operators ignore.
Operationally, we have a long way to go before our teams are trained well enough to provide personalization. This is a year that those who know their guests’ preferences will win.
Using AI within a property management system, a hotel should be able to provide a list of guest preferences for every single past guest. Certainly, there are team members who can remember what a guest asked for on their last visit to the front desk or the restaurant/bar. But that employee may not be around on arrival of that same guest next week or next month.
Right now, most hotel robots are basic in their skill set, but once they speak to guests in the language the guest prefers, then we have something.
Chatbots are another value-add. They sound human on the telephone. Additionally, AI can assist with more productive scheduling based on peak demand trends — probably better than the guessing that many department heads use to schedule today.
And do not forget energy efficiency. AI can move the needle there, too. Yes, there are cybersecurity concerns. However, this year will be the first big one for AI use in the hotel industry.
Not Your Father’s Guest
Despite improved consumer sentiment, we will need to step up our game. Today’s guests are both more discerning and more cost-conscious. That can be a difficult combination, especially when adding in that many are now Gen Z.
Guests want a spotless room, a fully-enabled entertainment system with multiple viewing choices and an AI component such as Alexa, fitness rooms with more than treadmills and free weights, a restaurant with creative menus and much more. They also have shopped the competition on rates. They want more for less. They got nothing but aggravation during the lockdowns and got gouged — in the opinion of our guests — with high rates during the “revenge travel era.” And they are not necessarily loyal to the same brands.
Owners will have to walk the fine line between guest services and costs — labor costs and supply are major concerns. How does one decide to add a service or not? Does the brand dictate this? Will our marketing include enhanced digital marketing that optimizes SEO, guest experience, paid media and personalization? It must.
This year, money will be tight for renovations, but next year we might have loan defaults or we might have low-interest rates. I am not ready to predict a recession for 2025, but we should be able to avoid one this year.
My bet is for an exciting 2024 with some revenue growth at or above inflation levels, improving consumer sentiment as inflation dissipates, and a crazy election year. May we all pray for peace and revenue growth in 2024!
Hotel Wellness in 2024: What Is It and Who Needs It?
This article first appeared on HNN.
A Buzzword Around Industry for a While Has Just Hit Full Stride
The National Institute of Wellness considers wellness to be “an active process through which people become aware of, and make toward a more successful existence.”
Millions of us serve the hospitality industry every day. Some are in the trenches, back-of-the-house team members who seldom get the recognition they deserve. Others work in the front of the house, sometimes getting recognition, other times getting blamed for a less-than-perfect stay, room, meal or service. Still others are in corporate roles, sales roles, and other facets of hospitality, but we all have one thing in common — stress. Yes, there is stress in our industry. This is where hotel wellness is needed, for both our employees and our guests.
After all, we are open 24/7/365 — 366 days this year! We work all sorts of hours and frankly, while I believe this is a very noble profession, we work hard and are perhaps underappreciated. Guest expectations are high, owner expectations even higher, management is under fire and today’s team members are frequently underprepared for their job responsibilities. The reason for this lack of preparedness is simple: We promoted all up-and-coming stars as soon as the masses disappeared during the lockdowns of 2020.
We all need to take a breath, clear our minds and become more mindful of our fellow team members, guests, relatives and friends.
Who needs wellness?
There is an expression I have never forgotten: “Stop the world, I want to get off.” My mother told me that when I was around 11 years old; and at that time, I decided to adopt the saying, “Everything in moderation.” Well, I probably don’t do anything in moderation, but I do avoid crazy stuff and believe in living life to the fullest. And many of us do the same thing. Either way, the world never stops for us to get off — we must decide when we can get off and literally “take a break.”
I believe there is no time indicator for a “break.” It can be five seconds of deep breathing, five minutes of meditation, five hours of walking, relaxing or just being with friends and loved ones. It can be five days off from work, five weeks of vacation or whatever you’d like. The most important thing is that we must give ourselves a break from stress.
What Types of Vacations or Breaks are Available?
Today’s hospitality industry has begun to focus on just that. IHG Hotels & Resorts has its fitness brand, Even Hotels. Hyatt, Westin, Dream Hotels and Ritz-Carlton all kicked off various hospitality wellness programming, mostly in the past eight to 10 years.
The focus might be on nutrition, relaxation, fitness, yoga, stretching, mindfulness, meditation or more. Sure, it is easier to create a relaxation identity if you are on a beautiful beach, a fitness identity if you have a huge gym with great amenities, and a mindfulness program if you have Deepak Chopra.
We as hoteliers and leaders in the hospitality industry must do two things to improve wellness: Create some of this for our guests and go do it ourselves!
As I write this, I am planning my next two vacations. One will be part adventure, part unplugging, and includes visiting a country I have never been to. The other is both educational and lots of fun and involves drinking lots of wine and learning more about it to add to my sommelier credentials. These planned trips this coming year allow for mindfulness and relaxation, nutritious foods and interesting and new beverages, nice walks and strenuous exercises, and being alone with my wife.
When we plan this type of thing for our guests, it is best to put ourselves in their shoes and improve hospitality. Here are some new wellness programs you can implement at your property:
- Nutritious menu items
- New yoga mats or exercise equipment
- New educational programming
- Food and beverage events
- Spa or relaxation experiences
When we plan for ourselves, we must do something that puts us in a happy place as that will reduce the stress of our return to work. Some will plan a dry January; others will join a gym. Let’s start 2024 with a healthy body and healthy outlook!
Transforming Hotels With Artificial Intelligence
Operators Who Ignore New Tech Will Be at a Severe Competitive Disadvantage
*This article was originally published on Hotel News Now
Scheduling and training processes are becoming streamlined; revenue management has improved optimizations, and SEO and marketing strategies rely on AI to enhance online visibility. Chatbots are used for customer service and exist with many hotel providers today.
Practical Uses of AI in Hospitality
We just revised our menus and wine lists while utilizing AI, and while AI provides insights and depth, it still takes a human to know what is best in a market. This is true with all use cases for AI. It can speed up many processes, support innovation, etc., but there needs to be human knowledge present to question, validate and understand it. Let’s dig into some examples of using AI in hospitality.
Generative AI
As defined by McKinsey and Co., generative AI algorithms can create new content, such as audio, code, images, etc. Commonly reported uses of generative AI tools are in marketing and sales, product and service development, and service operations. Think ChatGPT — you can submit a list of five social media post ideas to promote your hotel. By giving the tool some background into the target market, it can share feedback on your posts, offering the best time to post, which one of the five would be best for engagement, or coming up with a new idea altogether.
The risks of AI include inaccuracy, cybersecurity and intellectual property infringement, according to an April 2023 survey done by McKinsey & Co. Looking specifically at generative AI’s predicted impact on jobs, service operations are the only function in which most survey respondents expect a decrease in workforce size. AI is not a job killer.
Personalization
Improvements in revenue forecasting accuracy alone are significant for hotel revenue management, but there are additional AI use cases that can improve customer relationships.
AI can improve digital marketing by enhancing customer personalization, generating better content — through tools such as ChatGPT — and tracking user journeys from website to website and click to click. Adding a chatbot provides information to potential guests and can encourage more guest bookings and create conversations.
One risk of chatbot use is frustration if a guest asks a question and the content does not exist on the website. The hotel must ensure that websites have comprehensive and correct information. Another potential drawback of a chatbot is AI hallucinations, which is when the chatbot provides false information.
Energy and Sustainability in Hotels
AI can optimize energy efficiency and sustainability by adjusting thermostats in guestrooms and adapting lighting and artwork to craft a bespoke environment.
For example, the Nest Thermostat is designed to learn the timing of heating and cooling, allowing the room to become more energy efficient.
The goal is for AI to improve hotel operations and streamline workflows, allowing human staff to attend to other essential tasks. One example is using robots to take extra towels, toothpaste, or food and beverages to guestrooms. Hotels should learn to love robot technology in 2024.
Innovation in Hospitality
As artificial intelligence continues to gain traction, it will be essential to remember that while there are plenty of unknowns, there are myriad opportunities to harness its power. MMGY expects AI to play a more prominent role in the following key areas of hospitality:
- Expanding creative concepting capabilities.
- Cross-channel campaign optimizations.
- Data analysis, insights and measurement.
Currently, revenue-management systems use data analysis to optimize pricing strategies based on demand and competitor pricing. New AI technology for revenue management should be used to price packages and personalize offers based on user preferences.
Technology can also be utilized for hiring and training. Automated recruiting tools use AI to find applicants and chatbots can screen applicants. After hiring, e-learning platforms support employee training and development.
Cybersecurity
Ransomware attacks against significant hospitality companies have already occurred, and we will likely see a new focus on cybersecurity in 2024. Training staff must be a critical focus of hospitality in the future.
AI can improve the way hotels manage day-to-day operations. By deciphering patterns and predicting demand, AI enables hotels to optimize staff schedules and efficiently manage resources. This translates to a smoother, more compelling experience for guests. From trip planning to digital concierge to luggage storage on check-out, AI is changing the hospitality industry.
While we are still behind other industries, we are striking the balance between art and science.
Insights into the Hotel Industry: A Conversation with Bob Rauch
In the interview with Gary London, Bob Rauch discusses various aspects of the hotel industry in 2024, particularly focusing on the United States and Southern California, with an emphasis on San Diego. Listen as we dive into the resilience of the hotel market, technology improvements, and labor challenges within the industry.
Resilience of the Hotel Market:
Despite facing challenges such as 9/11, the Great Recession, and the COVID-19 pandemic, the hotel market has stayed resilient, with periods of strong growth interspersed between downturns. San Diego, in particular, has managed to capture markets even during weaker periods due to its coastal location and strong visitor appeal.
Impact of Technology in the Hotel Industry:
Technology, particularly artificial intelligence (AI) and robotics, has played a significant role in the hotel sector. For example, the implementation of service robots for tasks like delivering towels and food items to guests, as well as using AI for revenue management and guest communication. Technology is a key driver for enhancing guest experiences and operational efficiency.
Labor Challenges in Hospitality:
Labor-related issues consistently pose challenges in the hotel industry. From managing diverse employee needs and conflicts to ensuring guest satisfaction through empowered staff, labor remains a critical aspect of hotel operations. Technology adoption, including robotics, can mitigate some labor-related challenges but also underscores the importance of well-managed human resources.
The interplay between technology, labor management, and market resilience is shaping the industry’s trajectory, with a specific focus on San Diego’s hotel landscape.
Hospitality professionals should continuously adapt and adjust strategies based on market conditions and changing consumer preferences. If you enjoy content like this, subscribe to Hospitality Innsights to stay up to date.
Top 10 Trends for the Hospitality Industry in 2024
The hospitality industry transformed in 2023, driven by technological advancements and evolving guest demands. We’ll explore the ten emerging trends for 2024 in the hospitality industry.
Artificial Intelligence
AI in the hospitality industry will enhance revenue management, menu development, employee and guest education, marketing, sales and more. We are at the very beginning of this exciting technology, and yes, there are some cautions ahead.
Wellness, Fitness, and Diet
Hotel properties that expand fitness centers, personalize spa treatments, and craft healthy food and beverage menus will rule. While luxury travelers have already been seeking wellness, a basic hotel gym with simple exercise equipment is not going to be acceptable to the masses either. Consider wellness offerings like aromatherapy, mindfulness classes, daily yoga, and Pickleball – the fastest-growing sport in America.
Personalized Service
Hotels have an opportunity to offer personalized interactions beginning with the day a potential guest visits our websites, and extending long after a guest leaves our properties. When it comes to in-person experiences, guests want to be treated as special when they pay top-dollar. Consider leaving a chilled bottle of bubbly in their room on their anniversary or help them discover experiences that align with their interests.
Training
Hoteliers, it’s time to focus on talent as a major trend this year. Generation Z will require competitive pay, extensive training, and flexibility. The metaverse is reshaping the employee and guest experience. Airlines, hotels, restaurants, and more travel providers are leveraging this platform for employee onboarding and training. Hilton Worldwide was among the first hospitality brands to embrace the metaverse to develop a virtual training program, which is particularly effective when it comes to younger employees, who tend to prefer digital learning and gamification.
Robotics
Embrace robots in hotels to help with customized service, staff support, and continued guest loyalty. They can vacuum, quickly deliver room service directly to the guest room, and provide concierge services. The global market for hotel robots is expected to grow from $79 million in 2020 to $338 million by 2025, at a compound annual growth rate of 32.8 percent, according to a report by MarketsandMarkets.
Chinese Travelers
Chinese travel to the US will increase dramatically as China was the last of our strong markets to return to outbound travel due to COVID-19. Research by MMGY shows a strong intent to travel and the Chinese government is relaxing rules around visa renewals (shortening the wait times for new visas). Expect strong growth in this sector, perhaps close to 20%.
Diversity, Equity, and Inclusion (DEI)
DEI is now mandatory training for most companies. More women will be presenters and panelists at conferences and will have more responsibility in their positions. Women in Tourism and Hospitality are making a big hit and diversity is the driving force. People of color are being hired more frequently and are rising in the ranks more quickly. Take a look around you—it is already happening!
Sustainability
Environmentally conscious travel is a key concern of 76% of global travelers, according to the American Hotel & Lodging Association (AH&LA). Hoteliers are trying to reduce their properties’ carbon footprints and AH&LA just launched the Green Key Global certification program. There are expectations that hotels have programs that reduce waste and energy consumption, use eco-friendly materials, follow environmentally sensitive practices, and support local communities. Showcasing this on your website is critical today.
Debt
Debt is expensivefor new construction or acquisitions which makes the math difficult for developers and buyers. Most debt is priced in the 8% range with 60%-70% loan-to-value. The Commercial Mortgage-Backed Securities market appears to be picking up momentum for five-year fixed-rate debt, slightly lower than the 8% range. Hotel construction will likely include a mixed-use component to integrate spaces that cater to the multiple needs of an urban mixed-use development. These may include residences, wellness hubs, serviced offices, and private member clubs.
Remote Workers
Remote-work flexibility is also an overall benefit to the travel and hospitality industry, according to Tourism Economics. The number of days worked from home grew from 5% before the lockdowns to 28%, more than 1 in 4 days. Thirty-four percent of leisure travelers said they plan to travel while they work remotely. Airbnb has said its guests are extending typical weekend stays a night or two over the shoulder days.
In addition to the 10 hospitality trends mentioned above, The Federal Government plans to improve the overall air travel experience through the Federal Aviation Administration reauthorization bill, lower U.S. visitor visa interview wait times, and reduce Customs wait times at U.S. airports and ports of entry. This is being done by other countries already. These trends are either on the horizon for 2024 or are already underway. Wishing you a fantastic 2024 with no recession in sight!