California sets record for number of hotel rooms opened in 2019
In 2019, California set a new record for the number of new hotel rooms opened, according to Atlas Hospitality Group’s “California Hotel Development Survey 2019 Year-End.” During the year, the state opened 11,795 rooms in 92 hotels.
As of year-end 2019, California had 212 hotels with 28,102 rooms under construction, according to the report. There were 1,199 hotels with 159,711 reported rooms in various stages of planning, which represents a 7 percent room-count increase over 2018.
But, is there a concern of oversupply in the state? According to the report, California has been able to absorb the new room supply thus far. Researchers said that’s one reason the state is able to garner interest from domestic and global investors.
Market Story
Drilling into more specific markets, Los Angeles County holds the most rooms under construction (7,030 rooms in 47 hotels), according to the data. During the year, the county opened nine new hotels with 1,167 rooms, a 24-percent room count decrease from the 11 hotels with 1,526 rooms in 2018. The 271-room Santa Monica Proper Hotel was the largest property in the county to open.
Orange County followed with 3,166 rooms in 17 hotels under construction construction. The county opened three hotels with 632 rooms in 2019, a 42 percent room-count increase from the 445 rooms in three hotels opened in 2018. The largest hotel in the county under construction is the 613-room Westin Anaheim Resort. The largest hotel to open in Orange County (and all of California) last year was the 352-room Cambria Hotel Anaheim Resort Area. (The 351-room Grand Hyatt at San Francisco Airport was the second-largest hotel to open in all of California.)
When looking at the highest number of rooms opened during 2019, the winner was Santa Clara County. The area opened 12 hotels with 1,919 rooms, which was a 954 percent room-count increase over 2018, which saw only the 182-room AC Hotel by Marriott open in Sunnyvale that year. The largest hotel to open last year in the county was the 238-room Hilton Garden Inn in Sunnyvale. At year-end, Santa Clara County had 17 hotels with 2,539 rooms under construction, the largest being the 255-room Ameswell Hotel in Mountain View.
Original Article:
Hotel Management 01/13/20
California Hotel & Lodging Industry (CHLA) Advocacy Summary 2019
2019 was defined by labor and the environment. The California legislature and Governor Newsom signaled a strong shift in favor of organized labor when it rewrote the state’s labor laws. Coalitions, including CHLA’s, fought to restrict the impact of Assembly Bill 5. While CHLA and the Legislature fought over how to categorize workers, CHLA was also engages with the executive branch to reduce the burdens played on employers by Cal/OSHA. The support for organized labor is not limited to the legislature or executive agonies, as many local jurisdictions have put measures to the voters that severely impact lodging establishments’ ability to function.
Legislators opened 2019 with legislation aimed at further restricting business’ ability to collect and use data. The California Consumer Privacy Act took effect January 1st with some alterations to allow businesses to use more types of data than would otherwise be permitted.
Both the legislature and local governments were tired of Short-Term Rentals (STR). In 2019, CHLA worked directly with legislators and council members to introduce and move legislation that would force STR companies to limit the permitting of STRs in specific regions. If implemented, this legislation has the potential to be expanded across the state in future legislative years.
| 2019 Legislative Session by the Numbers |
| 792 measures were introduced in the Senate |
| 1,833 measures were introduced in the Assembly |
| 1,042 bills advanced to the Governor’s desk |
| 870 billed were signed by Governor Newsom |
| 172 bills vetoed, for a veto rate of 16.5% |
Source: California Hotel & Lodging Industry Advocacy Summary 2019
Cybersecurity, Labor and Opportunity Zones 2020
In the legal realm, hotels have been thrown some difficult challenges in California. Aside from an increase in minimum wage (not to be taken lightly, and the jury is out on its impact), California has enacted two significant laws that have received a lot of media attention: The Consumer Right to Privacy Act of 2018 and AB5.
The Consumer Right to Privacy Act is aggressive in protecting Californians’ right to privacy by giving consumers much more control of their personal information and loads the burden of compliance on both owners and operators to comply with a complex set of laws to achieve that goal. AB5 on the other hand codifies and intensifies the standard of classifying an individual as an independent contractor and will have far reaching impacts on employer costs with respect to Social Security and Medicare taxes, unemployment and disability insurance, workers’ compensation costs and coverage, sick leave, minimum wage, overtime, and rest breaks and meal periods.
Finally, at the Federal level, the IRS Release of the final Opportunity Zone regulations – consisting of 350 pages of explanations of what was changed and what remained unchanged from the proposed regulations released in October 2018 and May 2019, and almost 200 pages of regulations and examples – contains mostly good news for real estate investors with a significant caveat: the rules are still complex and the jury is out on the law’s long term impact.
Cybersecurity:
Hotel Managers and Owners Be Warned – You are Responsible for Your Hotel’s Data Security:https://hotellaw.jmbm.com/ftc-warns-hotel-data-security.html=
CCPA: Loyalty Programs, Data Retention and the Brave New World of Privacy:https://hotellaw.jmbm.com/the-california-consumer-privacy-act-what-hoteliers-need-to-know-now.html
Labor:
Hotel Lawyer: Labor & Employment New Year Round-Up: What to Expect in 2020:https://hotellaw.jmbm.com/hotel-lawyer-labor-employment-new-year-round-up-what-to-expect-in-2020.html
California limits use of independent contractors, creating significant liabilities and penalties for California employers: https://hotellaw.jmbm.com/hotel-lawyer-california-limits-use-of-independent-contractors-creating-significant-liabilities-and-penalties-for-california-hotel-and-restaurant-employers.html
Opportunity Zone:
How the Final IRS Opportunity Zone Regulations Impact Real Estate Investment and Development in Qualified Opportunity Zones: https://www.investmentlawblog.com/2020/01/14/how-the-final-irs-opportunity-zone-regulations-impact-real-estate-investment-and-development-in-qualified-opportunity-zones/
How the Latest IRS Opportunity Zone Regulations Help Real Estate Developers Qualify for Opportunity Zone Tax Benefits: https://www.investmentlawblog.com/2019/06/13/how-the-latest-irs-opportunity-zone-regulations-help-real-estate-developers-qualify-for-opportunity-zone-tax-benefits/
By Guy Maisnik
JMBM – Partner – Global Hospitality Group
(310) 201-3588 (office)
(213) 280-9972 (cell)
San Diego Has More Than 1,600 New Hotel Rooms
San Diego County leads Los Angeles and Orange counties in the number of hotel rooms that debuted in 2019
San Diego County’s hotel industry continues to show robust growth, with a total of 1,668 new rooms opening in 2019 — a 36 percent jump compared with the previous year, reports Orange County-based Atlas Hospitality group, which each year tracks development trends in the hospitality sector.
The 2019 hotel openings are second only to San Diego’s record high of 2,402 new rooms in 2003, when a 750-room tower was added to the bayfront Manchester Grand Hyatt.
The largest local hotel opening last year was the $260 million Sycuan hotel resort, which included a 12-story, 302-room hotel. Following close behind was the 16-story, 246-room Carte hotel in Little Italy, which opened in September and cost $89 million to develop.
Among California counties, San Diego came in second, just behind Santa Clara, in terms of the number of hotel room openings in 2019. Los Angeles and Orange counties were further behind, with just 1,167 and 632 rooms, respectively, that debuted last year.
In the area of new construction, however, San Diego trailed the two Southern California counties. Locally, there currently are 15 hotels accounting for nearly 1,700 rooms under construction, which, while considered a decent amount of growth, still lags the more than 2,400 rooms that were being built in San Diego County in 2018. In California, Los Angeles led all other counties, with more than 7,000 rooms under construction, and in Orange County, there are more than 3,000 rooms yet to open, with the largest being the 613-room Westin Anaheim Resort.
Atlas CEO Alan Reay noted that despite rising construction costs, lenders continue to provide financing for hotel projects, As a result, California developers have so far not been dissuaded from pursuing projects, especially in San Diego, which remains especially attractive to investors, he said.
“San Diego is definitely looked upon favorably by billonstruction lenders and that’s because San Diego has such a diverse base of business, from tourism to biomedical technology, and convention and meeting business,” Reay said. “And investors as well as lenders like an economy that is not heavily reliant on one industry. San Diego is one of the most desirable markets in California.”
For all of California, 2019 was a record-breaking year, with the number of hotel room openings reaching a new high of 11,795. That’s up from 10,793 rooms in 2017, a more than 9 percent increase. Like San Diego, the number of rooms currently under construction — 28,102 — is down from a year earlier.
One of the more high-profile San Diego hotel projects that has yet to make its way onto Atlas’ list of projects under construction is the long-planned Ritz-Carlton in downtown San Diego. Cisterra, a San Diego-based developer, had hoped to have the $450 million mixed-use project at Seventh Avenue and Market Street well under construction by now but a union-backed legal challenge that has since been resolved delayed construction. Cisterra Project Principal Jason Wood said the developer is close to finalizing financing and hopes to be under construction by the end of the year.
Of the 15 San Diego County hotels now under construction, two luxury hotels overlooking Oceanside Pier lead the list. Developer S.D. Malkin Properties is building the six-story, 226-room Destination hotel at the southeast corner of Mission and Pacific, and the seven-story Joie de Vivre, with 161 rooms, on the northeast corner of the same intersection.
Others include the 142-room Marriott-branded AC Hotel in downtown San Diego and a 142-room expansion of the Hotel Del Coronado.
While San Diego County’s hotel sector has shown steady increases in occupancy rates and overall revenues over the last several years, growth has slowed a bit this year, with revenues down a little more than 1 percent through the end of October compared with the same period a year ago.
By Lori Weisberg
Original article:
The San Diego Diego Union-Tribune
01/14/20
From 2020 to 2030: The Next Evolution of Growth
Bill Marriott correctly predicted that millennials were the next big thing, but how to capitalize on that is a question that all operators today must get their arms around. One way that many large companies are approaching this is via acquisition. MGM just acquired a stake in Sydell, a boutique lodging brand, Intercontinental Hotel Group (IHG) acquired Kimpton a few years back and recently Hyatt bought Two Roads Hospitality. In theory, these boutique brands offer the ability to scale at the same time they attract a more “millennial mindset” traveler.
Boutique hotels have a very different demographic of the traveler–they heavily favor millennials, hipsters, LBGTQ and non-traditional markets at a time when the major brand companies are adding more brands for many reasons. We saw just last month the merging of Aimbridge and Interstate Hotels, creating a management company that has over 1400 hotels. They will likely continue to snatch up small, boutique management companies in an effort to truly understand that market. Again, scale is part of the equation.
To survive and thrive over the next ten years, a hotel company will need to thoroughly understand distribution channel management, social media marketing and where to find these new travelers who are currently staying at boutique hotels, Airbnb, VRBO and non-traditional lodging facilities. Notice that the brands have added “cool, new brands” to their portfolios. Hilton has added Tru, Motto, Signia, Tempo and LXR. Marriott has added AC and Moxy in addition to Starwood’s Aloft and Element and IHG added Voco and Avid. In addition, each brand has rolled out new prototypes for their legacy brands in an attempt to be more appealing to a broader demographic.
Adding these companies alone does not guarantee success. After all, as rates become even more transparent and non-traditional brands and companies continue to grow their customer base, new marketing techniques are required. Truly understanding pay-per-click, key words, SEO, Facebook remarketing/SEM and the myriad new digital marketing content and schemes is paramount to success today. Moreover, the use of technology to keep the customer engaged, coupled with the use of social media like Instagram to keep them posting about our hotels has changed the game from just a few years ago.
Large companies will continue to scale, non-hotel companies will enter our industry and the company that wins will understand the advantages of cross-selling and serving customers in general rather than just hotel guests.
As an example, why couldn’t a hotel have multiple restaurants, a “we-work style” gathering place with coffee/tea/snacks, a gaming room, conference center and a “Home Depot style” outreach for locals. You live near the hotel and need a repair person? The hotel has several, each with different talents. Go online and book your handyman and you’ll be done searching.
The next ten years will have changes far beyond the last ten years. Remember, Facebook, LinkedIn, iPhone, Android, Twitter and many technology companies did not have these products 10-15 years ago. Think about Amazon—they came out of nowhere and now have over 100 million prime subscribers. The future successful hotel companies will be one of two types-they will be conglomerates with massive scale and tremendous cross-selling opportunities or they will be very strong niche players, hyper focused on a trend that will emerge from the many trends we see today. Will it be ecotourism, wellness tourism or independent boutique hotels? A combination of a few ideas? According to CBRE, “boutique hotels comprised just 3.2% of U.S. lodging supply in 2017 but represented 17.8% of the development pipeline by mid-2018.”
There are current hotel companies to watch but keep your eyes on Amazon, Facebook, Google, Apple and other companies that could spread their wings. Watch for new trends like Equinox in New York City.
They are targeting fitness and wellness, coupled with social spaces.
Equinox wants to own that new package of sleep, wellness and fitness.
The hotel industry has become a mainstream big industry and has captured the attention of the world. One look at the number of hotel schools today will remind all of us that we are not just a noble profession—we are a rapidly growing, global giant of an industry with changes, technological and all, occurring at warp speed.
When we look back at the last 10 years, we will find that international travel demand improved, business travel steadily increased and the aforementioned technology has shaped travel in a relatively short time. Just 10 years ago, there were no hotel apps, no Instagram, no iPads and no meaningful digital marketing. Personalization was largely a luxury boutique thing and automation was very limited. What is even more remarkable is that technology innovation might equal those 10 years over the next 24-36 months! To a great 2020 and beyond!
By Robert A. Rauch, CHA
