Hotel Development and Planning Decline

The survey of new hotel rooms opened, under construction and being planned throughout California for the first half of 2004 shows that Los Angeles was the only county in which the number of new rooms opened was higher for the first half of 2004 than it was for the first half of 2003. The L.A. total was 334 new rooms, up 35% from 241 rooms during the comparable period in 2003. But the number of new rooms that were opened decreased by 74% to 462 in Orange County, dropped by 56% to 790 in San Diego County, and slipped by 47% to 175 rooms in Riverside County. No new rooms were opened in San Bernardino County, down from 187 rooms in the first half of 2003.There is no simple answer to the decline in new hotel construction, according to Alan X. Reay, president of Atlas. In addition to the slow down in construction, Reay points out in his report, the number of new rooms in the planning stages has declined in every area of the state. Among the reasons for the decline, he says, are conversions of hotel sites to other uses such as condominium or mixed-use retail projects, problems securing affordable financing, and environmental or entitlement hurdles. "This slow down in rooms planned should bode well for hotel owners as it minimizes new competition and as such points to higher long-term profitability," Reay says.Although the number of new rooms that opened and the number of rooms in planning both declined, the number of new rooms that are under construction but not yet opened has increased in two Southern California counties, Riverside and San Bernardino. In the tally of new rooms under construction, San Bernardino County led the state with an increase of 238% (837 rooms in eight hotels as compared with 248 rooms in three hotels for the first six months of 2003). Riverside County ranked second, with an increase of 69% (1,058 rooms in six hotels as compared with 627 rooms in three hotels). The number of new rooms under construction in Los Angeles County declined 9% to 521, while in Orange County the number dipped 17% to 385 rooms. The number declined by 6% to 1,325 rooms in San Diego County, but San Diego still leads the state in the number of rooms under construction.