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Hotel development stalls across the Bay Area and all of California

Development pipeline dries up as 75% fewer properties opened last year in region

Atlas Hospitality Group's Alan Reay; 5952 Silver Creek Valley Road (Getty, Google Maps, Linkedin)
Atlas Hospitality Group's Alan Reay; 5952 Silver Creek Valley Road (Getty, Google Maps, Linkedin)

Development of hotels across the Bay Area and California appears stuck between floors.

Last year, builders of hotels across the nine-county region opened just three hotels, a plunge of 75 percent from the 12 hotels that opened in 2023, the San Jose Mercury News reported, citing a report from Atlas Hospitality Group.

The local hotels that did open had 348 rooms, down 78.4 percent from the 1,615 hotel rooms that opened in 2023.

“The increased cost of construction, the rise in interest rates, and many lenders pulling away from new hotel construction are continuing to apply downward pressure on new hotel development,” Atlas Hospitality stated in its report.

The near standstill in hotel development carried across the Golden State.

California added 3,798 hotel rooms last year, down 39.5 percent from the 6,280 new rooms in 2023. The state added 35 new hotels, down 34 percent from the 53 hotels the year before.

In Northern California, developers opened 18 new hotels with 1,849 hotel rooms last year, down 28 percent from the 25 hotels that opened in 2023, with 38.5 fewer rooms.

In Southern California, builders added 1,950 hotel rooms, down 19.8 percent from the 2,432 rooms in 2023.

The largest hotel that opened in California last year was the 197-room Chicken Ranch Casino Resort in Jamestown, northeast of Modesto.

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The Bay Area’s largest hotel opening last year was the 127-room Hope2 Suites by Hilton at 5952 Silver Creek Valley Road in San Jose.

Two hotels opened in the East Bay last year, including the 111-room Fairfield Inn & Suites at 220 North Greenville Road in Livermore and the 110-room TownePlace Suites at 7260 Johnson Drive in Pleasanton.

But it was a bust for hotel development in San Francisco. Only one hotel was under construction: a 169-room Waldorf Astoria.

“San Francisco County still had no new hotels open in 2023 or 2024, largely due to the overall hospitality and local market conditions,” Atlas Hospitality reported.

In Santa Clara County, four hotels with 557 rooms were under construction, including the 254-room Treehouse Hotel in Sunnyvale and  the 175-room Marriott Townplace Suites in Downtown San Jose.

The hotel market is expected to get worse before it gets better, according to Atlas Hospitality.

“We are seeing an increase in the number of hotels that have started then stopped construction and are now in default on their loans or in bankruptcy,” the report stated. “Hotel construction will remain weak as investors focus on purchasing existing hotels at discounts to replacement cost.”

Dana Bartholomew

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