The report, released today, forecasts that San Diego hotels "should be recovering in the next three months." Occupancy levels have already begun to improve significantly here, as they were down only 1.9% in June, as compared to 10.3% in January. The region's "theme parks, prime beaches and nice weather," have helped it bounce back, according to the Ernst & Young report. And discounted room rates have probably helped as well, seeing as San Diego led the state with a rate discount average of 2.7%.

Los Angeles and Orange County are not far behind San Diego when it comes to hospitality, as the report points out that these "primary leisure markets in Southern California have helped to improve the performance of one of the state's leading industries." Overall, Ernst & Young predicts a healthy long-term outlook for California's hospitality market.