California starts to refill hotel development pipeline

1,250 projects in planning stages across state, 88 opened in LA County last year, report says

The CitizenM hotel in Los Angeles (Booking)
The CitizenM hotel in Los Angeles (Booking)

Developers and investors are returning to planning hotels in California, a rebound from the stalled market of the early months of the pandemic, according to a report from Atlas Hospitality Brokerage.

Across California, 1,250 hotels were in planning in 2021, compared to 1,245 in 2020. Though a slight increase, the numbers show that developers pushed through with their plans to build hotels and more were added to the pipeline.

“Next year could surpass these levels,” said Alan Reay, the president of Atlas Hospitality Group, who authored the report. “… Overall, it’s very positive for the hotel industry.”

California saw 88 new hotels open in 2021 — just shy of the state’s record 92 openings in 2019. The hotels that opened last year also combined for more rooms at around 12,027, compared to 11,795 new keys in 2019.

More than half of these hotels opened in Northern California and about a quarter were located in Los Angeles.

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The CitizenM in Downtown Los Angeles was the largest hotel to open in its market area, with 315 rooms. The Amsterdam-based CitizenM hotel chain bought a 20,000-square-foot parking lot for $13.5 million in 2018 to build the property.

While the City of Angels saw 21 new hotels open, San Francisco hasn’t seen the same level of development.

One hotel opened within San Francisco’s city limits in 2021 — also a CitizenM, which developed a 195-room hotel in Union Square. Four hotels are under construction in San Francisco, with more in the works about 50 miles south in Santa Clara County, a center of Silicon Valley

There is a stark difference between the totals on planning and openings in large part because some developers saw 2020 as an opportunity to push on with construction but waited for restrictions to lift to actually open. Many of the openings rolled out in 2021 and developers eased up on construction – there were 121 hotels under construction across California last year compared with 212 in 2020.

“The bigger picture is that a lot of hotels are under construction and planning,” Reay said. Investors, developers and lenders are “looking long term” and see California as an attractive destination for tourism and business.

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