Expect L.A. Hotel RevPAR to Climb 3.2% in 2019

Los Angeles hotels are in for another strong year of occupancy gains and revPAR growth. According to research from CBRE, revPAR for hotels in the Greater L.A. market will increase 3.2% to $148 average daily rate this year. Higher-end hotels will likely see a 1.5% gain in revPAR, while lower end hotels will see a 2.8% increase. This year, hotel occupancy is also expected to increase to 81%, up 1% from 2018. These projections outpace the national forecast, which sets revPAR growth at 2.5% in 2019.

“A combination of leisure demand, international demand and commercial demand is driving hotel occupancy in Los Angeles,” Bruce Baltin, managing director at CBRE, tells GlobeSt.com. “A lot of the leisure demand is centered around Downtown Los Angeles, and that market is a strong driver of demand fort Greater L.A.—much more than it used to be. The commercial demand is coming from Silicon Beach and the tech bend.”

Room rate increases are fueling most of the revPAR growth, rather than occupancy. Hotel occupancy rates are at record highs in Los Angeles, and as a result, occupancy gains will likely be nominal or flat in 2020. “We are at all-time highs in occupancy, and it is hard to say that we will get new gains because we are at such high levels already,” says Baltin. “We are at occupancy levels that we have never seen before. We are not, however, going to see any decline in occupancy, at least in the short term. That is for sure. The market is also expected to see RevPAR growth.”

However, tempered new construction activity will help to put upward pressure on hotel occupancy at room rates. Although Downtown Los Angeles has seen strong hotel construction activity, construction costs are slowing new projects. “New development is slowing down because construction costs are very high at this point. It is hard to see economic feasibility with new development,” says Baltin. “We have seen a lot of development in the last three years. We are expecting continued development activity in the next two years, but it will start slowing down.”

However, looking into 2020, as more hotel projects currently under construction come to market and employment growth continues to slow, occupancy will likely soften in Los Angeles. The CBRE report predicts occupancy could fall to 77% in 2020.