"The numbers in Southern California are so good that it now makes a lot of economic sense to build hotels right now," Reay tells GlobeSt.com. Despite the surge in the number of new hotels and hotel rooms under way, no new hotels opened in Los Angeles, Riverside or San Diego counties. Reay explains to GlobeSt.com that the new construction is a matter of timing.
The surge in new construction contrasts with a dip in the number of new rooms in the planning stages in some counties. "Most of the new hotels that are under construction got under way when interest rates were still relatively low, but the movement in interest rates in the last 12 months will hold back development somewhat," Reay says. "Even though the numbers are good in terms of average daily rate and occupancy, the cost to borrow is making it more difficult for developers," he explains.
Although no hotels opened in the three counties, new rooms under construction soared by 551% to 3,045 rooms in San Diego County, climbed by 52.8% to 1,336 rooms in Los Angeles County and increased 173% to 898 rooms in Riverside County.
New rooms under way also increased in Orange County, increasing 12.3% to 975. San Diego County is home to the largest California hotel under construction, the 1,190-room Hilton San Diego Convention Center.
Even where new hotels opened, the numbers were moderate. Only three hotels totaling 491 rooms opened in Orange County, including the 252-room Doubletree Inn Guest Suites in Anaheim. In San Bernardino County, one hotel opened, the 122-room Hilton Garden Inn in Rancho Cucamonga. San Bernardino County bucked the trend by registering a decrease of 34.2% to 576 rooms under construction.
The dramatic rise in construction of new rooms in Southern California contrasted with Northern California, where room construction slipped 69%, from 14,088 to 4,391, and hotel projects decreased 66%, from 121 to 41. Reay's report forecasts that new construction will continue to increase in Southern California and will start to pick up in Northern California next year and into 2008.
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