LOS ANGELES—Downtown Los Angeles has a shortage of affordable hotel rooms, and it is starting to affect business at the convention center. The city estimates that it is short 4,000 to 5,000 hotel rooms, but most of the product in the pipeline is luxury projects, with individual room rates upwards of $400 per night.

“The City of L.A. is very short on affordable hotel rooms, and as a result, the convention center is having a hard time competing with other West Coast cities” Philip Powers, CEO of SunCapital, tells GlobeSt.com. “The estimates range from 3,000 to 5,000 rooms that are needed. At the same time, the new and proposed hotel development in Downtown Los Angeles is all high end, but millennials can't afford to pay $500 to $800 per night for a hotel room.”

Sun Capital and developers Barry Beitler and Pacific Property Partners is targeting the demand for affordable hotel rooms with its new $75 million to $80 million hotel development project, the Downtown L.A. Cambria Hotel, a 247-room hotel development near L.A. LIVE and the convention center. The developer filed entitlements for the project in last week, and expect to be breaking ground by next summer. “We thought that this 247 rooms would help to address some of those needs,” says Powers. “This is an exciting project not only because it helps the City of L.A. achieve what it wants, but also because it is in the middle of the L.A. LIVE development area. We are very pleased with it.”

SunCapital reached out to Cambria, which also has a flag in Time Square, specifically for the project. The firm specializes in well-designed affordable properties. “Cambria was really happy about the proposal to come to Downtown Los Angeles,” adds Powers. “The design is quite trendy, and our architect is really walking the line between affordability and design. We would have loved, for example, to have a glass curtain wall, but we can't offer that at $200 per night.”

One of the reasons that luxury developments have become so popular is because they offer such large profit margins; however, Powers says that the city has also been more open to approving projects in general, which has led to this issue. “Up until now, as we came out of the recession, the City in general was trying to encourage real estate development, so the environment toward any project was fairly positive,” he says. “Now, they are really interested in getting affordable rooms, so it might be harder now to get approval for an expensive hotel.” So far, the response from the city has been positive, and Powers expects to secure entitlements by the end of the first quarter next year. “The response from the city has been very positive, because this is what they want and what they need,” he adds. “I know that they wish there were more affordable hotel rooms.”

The Indigo Hotel at Metropolis is the only other affordable hotel project in the pipeline, but the two projects don't nearly meet the demand for lower-cost hotels. “There are some other projects that will help address the shortage, but nothing near what is needed,” says Powers. “Over the next couple of years, the city is going to be looking at ways to supply the convention center with what is needed.”

Instant Insights /

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