CALIFORNIA’S HOTEL DEVELOPMENT hit a decade-low in 2024, with just 35 new hotels and 3,798 rooms added, according to Atlas Hospitality Group. This marks a 34 percent drop in hotel openings and a nearly 40 percent decline in new rooms compared to 2023.
Atlas Hospitality Group’s 2024 Year-End California Hotel Development Survey attributed the decline to rising costs, high interest rates and reduced lending for new projects.
“We predict the hotel construction outlook will remain weak in the near term, as investors focus on acquiring existing hotels at discounts to replacement costs,” said Alan Reay, Atlas Hospitality’s president.
The survey also reported an increase in stalled projects, many of which defaulted on loans. The largest hotel opening was the 197-room Chicken Ranch Casino Resort in Jamestown, followed by the 179-room AC Hotel Sacramento and SpringHill Suites Chula Vista Eastlake.
Los Angeles County leads SoCal
Southern California remained a key area for hotel development, led by Los Angeles County, which opened five new hotels with 607 rooms—a 56 percent drop-in room count from 2023. The largest opening was the 150-room Cambria Suites in Burbank, alongside several boutique and midscale properties.
Despite the slowdown, Los Angeles County led in construction and planning, with 23 hotels totaling 2,833 rooms under construction and 199 projects with 27,457 rooms in planning. A key development is the 300-room Kali Hotel, Autograph Collection, in Inglewood, slated for a 2026 opening.
San Diego County added one new hotel in 2024, the 179-room SpringHill Suites in Chula Vista Eastlake, a 33 percent decline in room count from the previous year. However, San Diego’s future is strong, with 13 hotels under construction, including the 1,600-room Gaylord Bayfront Resort in Chula Vista—the largest project underway in California. With 91 hotels in planning, totaling nearly 15,000 rooms, San Diego remains a key player in the state’s hospitality sector.
Riverside County showed strong growth in 2024, adding four hotels with 519 rooms, up from 159 rooms in 2023. The largest addition was the 168-room Thompson Palm Springs. Riverside also has nine hotels under construction and 123 projects with 17,735 rooms in planning, including the 250-room Hotel Indigo in Coachella and the 449-room Hard Rock Hotel in Palm Springs.
Orange and San Bernardino counties saw mixed results in 2024. Orange County added two hotels with 298 rooms, a 52 percent drop from 2023, while San Bernardino County opened two hotels with 224 rooms, a 72 percent decline. However, both counties maintained steady construction pipelines, with key projects such as the Hyatt Place Ontario in San Bernardino and the La Quinta Inn & Suites in La Habra.
Northern California’s outlook
Northern California’s hotel industry faced challenges in 2024, with San Francisco County reporting no new openings for the second consecutive year. The 169-room Waldorf Astoria San Francisco is the only project under construction, signaling limited near-term growth.
Sacramento County stood out, opening two new hotels, including the 179-room AC Hotel Sacramento—the state’s second-largest opening. Sacramento has four hotels under construction and 43 projects with 5,829 rooms in planning, reflecting increased investor interest.
Santa Clara County recorded modest gains, with the 127-room Home2 Suites San Jose Silver Creek as its only opening. The county’s pipeline includes four hotels with a total of 557 rooms, with the 254-room Treehouse Hotel in Sunnyvale standing out. Despite a 12 percent decrease in planning inventory, Santa Clara still has 71 hotels in development, signaling long-term potential.
Challenges versus opportunities
The decline in hotel openings is due to rising construction costs, elevated interest rates, and reduced lender support. Developers are now focusing on acquiring existing hotels, often at prices below replacement cost. Many projects have stalled mid-construction, with some developers defaulting on loans or declaring bankruptcy, highlighting the financial pressures on the industry.
Despite these challenges, California’s hotel industry shows signs of recovery, with a strong pipeline of planned and under-construction projects. Key regions like Los Angeles and San Diego are leading the way, with large-scale developments set to reshape the local landscape.
Amid economic uncertainties, the focus will likely remain on high-value projects and strategic acquisitions. California’s diverse tourism base and global business status ensure a positive long-term outlook for the hotel industry.
The hotel industry is aiding wildfire recovery efforts in California’s Los Angeles County, where fires have destroyed thousands of structures and claimed at least 24 lives.
