SAN DIEGO—With 80% occupancy rates and strong room rates, hotels are holding their own in markets underappreciated by investors who may be not be familiar with the area, CBRE SVP Rod Apodaca tells GlobeSt.com. The firm recently arranged the sale of the 150-room Hyatt Place hotel at 2645 S. Melrose Dr. in Vista, CA—which could be considered one of these underappreciated markets—for an undisclosed price.

Apodaca and Bob Kaplan exclusively represented the seller, an affiliate of Irvine, CA-based CoreCapital, which had purchased the hotel in 2014. Brighton Management, the self-represented buyer, will also manage the property, a four-story hotel that opened in 2012 and offers approximately 1,200 square feet of meeting space and provides food-and-beverage service through its 24/7 Guest Kitchen, Gallery Market and Bakery Café.

We spoke with Apodaca about attracting investors to underappreciated markets and how they compete with disruptors like Airbnb.

GlobeSt.com: What are some strategies for attracting investors to “underappreciated” suburban markets like Vista/Carlsbad?

Apodaca: Many investors will look at primary core markets, i.e. Downtown L.A., Hollywood, Beverly Hills, Santa Monica and the Disneyland market. In San Diego, it's really the Gaslamp, Mission Valley and the Golden Triangle, but when it comes to Carlsbad and the surrounding cities, that's when people go, “Where's that?” It's too far away from Downtown San Diego and the Orange County submarkets they know, so they don't appreciate the amount of commercial business in that immediate area, in addition to its proximity to Palomar Airport and Legoland, which provides a great amount of business for hotels. The guests are there: occupancies in Carlsbad are extremely strong—in the mid-80% range—and the rates generated in Carlsbad by all means make it a strong market. But, it takes a bit of educating to the investment community that it makes good sense.

GlobeSt.com: What's the best way to educate them?

Apodaca: The limited availability of product in Southern California means it gets a lot of attention on a national basis. Once anything of any substance or quality goes on the market, and once they hear Southern California, they ask about the specific submarket and what makes it so attractive. Then, they look at the investment underwriting and occupancies, what supply is coming in and the quality of that supply—not only the supply of hotels, but the potential for growth and new business. It's a job to reach out to the investment community and expose the specific benefits of a market that appears to be a drive-through community but really isn't, like Carlsbad/Vista.

GlobeSt.com: How do hotels compete with Airbnb in these markets?

Apodaca: One of the general misconceptions is that Airbnb product will rent at a rate lesser than what you'd pay at a hotel. In certain markets, the rates Airbnb is charging are the same or greater than at the hotel product that is being delivered to the market. It depends on occupancy, but also guest profile as well as inventory in a specific market. Plus, there's the matter of consistency in what you're going to get. Most people won't go through the process of Airbnb for a business trip, and families on vacation like the security of a hotel. Airbnb is having a very marginal impact on the Carlsbad/Vista market, if any, because the occupancy rates are high and the rental rates are attractive to guests.

GlobeSt.com: What else should our readers know about hotels in these markets?

Apodaca: From the large institutional player to the small investor, it's all about understanding your demand generators over just strictly looking at a location. Cities like Carlsbad and Vista have their own submarkets that are driving demand to the product. You might be in Anaheim, but not by Disneyland, and yet you have 80% occupancy because there may be a another submarket servicing the hotel in way that is beneficial.

Instant Insights /

Airbnb Has Minimal Impact on Carlsbad/Vista Hotels

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