Defense spending boost: Pros and cons
Question: Is increasing defense spending by $54 billion a good idea?
Bob’s Answer: YES
Plummeting readiness levels, equipment in disrepair and jets that aren’t flying are just some of the reported challenges for our military. The military budget is just over 3 percent of gross domestic product.
Their operation and maintenance costs grew by almost 50 percent over the past decade, largely due to spending for health care, civilian pay and contracted professional and maintenance services.
With today’s labor costs, military expenditures must increase markedly to keep up.
Qualcomm site: A sports/fun district a good reuse?
Question: Does San Diego’s economy need a sports and entertainment district?
Bob’s Answer: NO
These districts benefit sports team owners, oftentimes significantly reducing proper infrastructure planning. This might include convenient freeway and light-rail/trolley access that are crucial components of planning these high density projects.
The prosperity of L.A. Live in Los Angeles vs. the struggles of Glendale, Ariz., prove that these districts do not guarantee success.
Development of the Qualcomm site can move forward without special incentives that may not benefit the economy as a whole.
Leadership – Information and Skills Needed for Hospitality Success in 2017
Whether you are an owner, industry executive, general manager or aspiring industry leader, 2017 is going to be a very solid year as we have forecasted. We have also covered the Top 10 Trends of the year to help us stay ahead of the game. But one of the…
Business Economy Is ‘Calexit’ a good thing for the economy?
Question: Would California be better off economically as an independent state?
Bob’s Answer: NO
Food prices would skyrocket as shipping would be considered international and the U.S. government would likely impose tariffs. Tourism would suffer as individuals without passports — about 50 percent of U.S. citizens do not have passports — or those angry with California would not visit. The impact on the U.S. is also dire as California has a huge economy. The bottom line is that this is an absurd idea for both the U.
S. and California.
Legalized pot: An economic boon to San Diego?
Question: Will the recreational marijuana business have a major impact on the local economy?
Bob’s Answer: YES
More tax revenue will flow but costs might exceed budget. State marijuana legalization has likely had minimal effect on marijuana use as it has been so easy to get marijuana for years.
I see little support for the dire predictions made by opponents or the huge financial gains claimed by advocates of legalization.
The real question is whether or not a long-term revenue gain will join with less drug-related crime. Only time will tell.
Trump trade, immigration policies: A hit to San Diego economy?
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Question: Would President Trump’s trade and immigration policies harm San Diego’s cross-border economy?
Bob’s Answer: NO
While I agree that President Trump has been very aggressive with trade and immigration, the truth is that our country is being harmed by trade deficits and terrorism. Once we take control of our trade with key countries and take control of immigration with strong policies, we can reform taxes, reduce regulations, increase infrastructure and military spending and grow the economy, especially here in San Diego where our military is paramount to a strong economy.
Absorbing Big Change on a Small Scale
By Emmet Pierce
Impact on Hotels
Hotel entrepreneur Robert Rauch oversees 14 establishments in the San Diego region. He said he supports the increase in minimum wage, except in the case of food servers.
Most of them already are making well above minimum wage, if you count tips, he added.
“When they are already making $30 per hour, why should I increase their base wage?” he asked.
The focus should be on creating a minimum wage that helps people who are below the poverty line, Rauch added, not food servers who may be earning as much as $70,000 per year based on their tips.
Rauch said he is concerned that the rising minimum wage in San Diego will price students out of the job market. If hoteliers and restaurateurs have to pay a student trainee the minimum wage, many won’t hire them and will seek out more experienced workers, he said.
“That person wants the job badly but isn’t of a lot of value to me,” he said of student employees. “They don’t even know how to punch a time card. What will happen is they won’t get those jobs.
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Would a soccer stadium give economy a boost?
Question: Should the city approve a soccer stadium development plan for the Qualcomm Stadium site without a public vote?
Bob’s Answer: NO
San Diego must create a strategic plan first. The Chargers put us under pressure for a major public subsidy and it was bad policy and rightfully was soundly defeated.
The soccer stadium might be a great fit — but we as citizens have a right to a proper review of alternatives by our elected officials.
Let’s do this right and create the highest and best use of the Qualcomm Stadium site.
Hotel building boom continues in Southern California
Hotel developers remain bullish on Southern California, with more than 13,000 rooms under construction during 2016, plus 66,000 more in the planning pipeline.
The 12 percent growth in last year’s construction activity over 2015 is documented in a new year-end report compiled by Orange County-based Atlas Hospitality Group.
Los Angeles easily rivals all other counties with 7,239 rooms currently being built, including a 900-room InterContinental nearing completion in downtown L.A. The 73-story high-rise, the largest hotel in the state to begin construction last year, is due to open in the spring.
An InterContinental is also being built in downtown San Diego.
At 400 rooms, it is the largest of the eight hotels that were under construction last year in the county. Those properties accounted for 1,444 rooms, a 32 percent jump in volume over the 1,091 rooms built in 2015.
As evidence of the keen interest in hotel development, there are 679 hotels, with nearly 103,000 rooms statewide, in various stages of planning — a 39 percent room count increase over 2015.
Credit a six-year, post-recession run-up in room revenues and escalating hotel values, plus a relatively strong economy, for giving lenders and developers the confidence to forge ahead with ambitious projects following a years-long dearth of new supply.
“The reason why did we not see development in 2009, 2010, 2011 is because everything was selling way below replacement cost,” said Alan Reay, president of Atlas Hospitality.
“Some would argue that the new rooms today are making up for the supply we should have had over the last several years. It’s like the housing market, people build more and more and pretty soon you have an imbalance. Are we at that imbalance stage today? No, because we’re just making up for the amount of rooms that should have been added between 2010 and 2013.”
In all, six hotels with 1,017 rooms opened in San Diego last year, the largest a dual-branded, 400-unit, Marriott SpringHill Suites-Residence Inn located on the downtown waterfront. It represented a sharp increase over the 711 rooms that made their debut in 2015.
Orange County, though, boasts the largest 2016 opening in the state — the Great Wolf Lodge Southern California, a $250 million indoor water park and 603-suite hotel in Garden Grove. That alone was responsible for a whopping 198 percent increase in last year’s hotel openings, based on the number of rooms.
Given the thousands of hotel rooms planned for Southern California, there is some anxiety about the region heading toward over-saturation, although it’s highly unlikely all those projects will get built.
Still, it’s not surprising that development is moving forward at a rapid clip, given the continued growth in hotel revenues (4 percent for San Diego last year and 11 percent for Los Angeles) and high year-round occupancy rates.
“Everything that’s opened recently in San Diego and that’s under construction will be absorbed in two to three years, meaning that occupancy won’t drop much at all,” believes San Diego hotelier Robert Rauch, whose company is getting ready to open a Fairfield Inn in San Marcos and is hoping to develop another hotel in Inglewood, just a half-mile away from the planned Rams-Chargers stadium.
“Adding 1,000 rooms a year, that’s a small percentage of the 60,000 rooms we have now. I’m not worried now about over building, but the question is how many in the pipeline will actually be built.
If all those get built, then I’m worried.”
S.D. Is Already Game For Soccer in Town
By LOU HIRSH
San Diego — Investors pushing to bring Major League Soccer to San Diego have not yet made the sale.
Details on a proposed $200 million Mission Valley stadium, with adjacent commercial and civic amenities, have yet to be approved by the city and potentially San Diego State University.
Local business observers, however, say that the arrival of a pro soccer team — in addition to healing civic pride after the departure of the San Diego Chargers — could be a logical economic extension of what is already a growing local economy geared to the game of soccer.
Those include training businesses, league-play facilities, suppliers, retailers and other businesses geared to what has long been among the world’s most popular sports — though less so on the pro level in the U.S. At a recent downtown rally and media event organized by the local investor group, MLS Commissioner Don Garber said the San Diego region boasts a young, enthusiastic demographic of soccer fans that the league has been looking to attract for the past several years.
For the region, there would likely be bottom-line benefits in the form of hotel room bookings and related local spending by visitors during the course of MLS seasons — spanning 17 regular-season home games from March to October — along with other events that would be held in the proposed new soccer and college football stadium the rest of the year.
Three years after Juan Carlos Paz y Puente and his five business partners started The Futbol Factory in Chula Vista, its three indoor practice fields now serve nearly 1,200 enrolled students — ages 4 and up, including children, teens and adults — learning the basics of soccer.
Paz y Puente is a former drummer and music producer who grew up in Mexico City, which has four pro soccer teams.
He anticipates that the presence of Major League Soccer in San Diego will serve to further galvanize a region that is already fond of the sport.
“It will help to make soccer more a part of the common culture locally,” said Paz y Puente, pointing to what happened in the city of Tijuana when the Xolos started playing in the Mexican pro league in 2007, after the city went decades without a team. The Xolos’ fan loyalty — which now crosses fervently into San Diego County when the team plays here — was sealed after Club Tijuana won a championship in 2012.
Provided the details can be worked out, experts are projecting numerous potential economic and civic benefits if San Diego is victorious among the 10 cities currently vying for four expansion slots being made available by the MLS.
Among current indicators is the activity already being generated throughout the region by youth and adult amateur league play.
Hotelier and industry consultant Robert Rauch, CEO of San Diego’s RAR Hospitality Inc., said his Hilton-branded hotels in Carmel Valley regularly fill up with visitors to soccer league events including the twice-annual Surf Cup, held at sites including the San Diego Polo Fields in Del Mar.
Those tournaments attract some of the best high school talent in the western U.S. and are frequently visited by college scouts from around the nation. Rauch estimates that youth and adult soccer leagues — along with numerous other nonpro leagues geared to softball and basketball — generate 6,000 to 8,000 room nights at his hotels annually.
As for bottom-line impacts of the MLS on the San Diego region, Rauch said he would need more data but would guess roughly that pro soccer games played in Mission Valley could generate about $3 million per game in spending on hotels and related expenses like restaurant meals and retail store visits.
That assumes, he noted, that about 5,000 people within a total crowd of 25,000 in Mission Valley would be from out of town. Each of those attendees would generate two hotel-room nights, for a total of about $1 million in hotel spending and $2 million in ancillary spending.
Given that an MLS regular season includes 17 home games out of a 34-game season that could mean about $51 million in direct local spending by those visitors annually. The proposed new stadium could generate more spending the rest of the year, through college football and other events.
“I’m very bullish on the MLS and soccer in general,” Rauch said of the potential impact for the local hotel industry.
He said he would like to see the city review multiple development and venue proposals for Mission Valley before deciding specifically on the plan put forward by the current investor group.
“It can’t hurt to see what else is out there,” Rauch said. “You don’t just have to take the first proposal that comes to you.”