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Thursday, Mar 28, 2024
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Hotel Lights Out, The Party’s Over

If there was any doubt that the recent buying boom, which saw a record number of hotels sold, is over, consider that the historic La Valencia Hotel in tony La Jolla failed to find a buyer after going on the block early this year.

Now it appears that the building boom that accompanied the buying frenzy and brought such hotels as the 511-room Omni, the 420-room Hard Rock and the soon-to-open 1,190-room Hilton Bayfront also is on the wane.

While four new hotels opened in the first half of this year, none has more than 250 rooms, and all went under construction before financing dried up in the wake of the subprime lending meltdown, said Alan Reay, an Irvine hotel broker.

In the same year-ago period only one opened: the 99-room Holiday Inn Otay Mesa, according to a midyear survey by Reay’s Atlas Hospitality Group.

Though there were six hotels under construction, the total number of rooms , 2,155 , was a 29 percent decline from the first half of last year and with the exception of the Hilton Bayfront, the others under construction are small. Only one has 250 rooms.

But the new Hilton, adjacent to the San Diego Convention Center, threatens to erode occupancy and room rates downtown, where more hotels are clustered than anywhere else in the county, says Reay.

“Hotel people I’ve talked to in the downtown area say they are in a decline in their numbers,” he said. “And this is before the Hilton opens up.”

There are no reports available that show a breakout of how business has fared in the county’s lodging submarkets in July, the height of the peak travel season.

But Tennessee-based Smith Travel Research reported that local inns suffered a 6 percent decline in occupancy to 83.5 percent during a 28-day period ending Aug. 2.

Atlas Hospitality’s midyear report shows there are 64 properties with 17,068 rooms , a 35 percent increase from the same period in 2007 , on the drawing boards. Typically, 10 percent or less are built.

Among the largest in the pipeline is a 650-room hotel proposed by Miller Global Properties LLC of Denver that would carry the Nickelodeon Resorts by Marriott flag at Liberty Station in Point Loma. Executives with Miller Global could not be reached for comment.

A 1,900-room Marriott has been proposed for Ballpark Village on property owned by JMI Realty, the real estate arm of San Diego Padres owner John Moores. That hotel is also in the approval process, and Marriott did not return a call seeking comment.

Doug Manchester, who owns the Manchester Grand Hyatt, the city’s largest convention hotel, proposes three hotels with a total of 1,280 rooms for the Navy Broadway Complex on North Harbor Drive. Manchester did not return a phone call. Yet Reay said he doubts whether the Broadway Complex hotels or the Nickelodeon at Liberty Station would obtain financing.

“In today’s market, their chances are slim to none,” he said.

Currently, the San Diego Unified Port District is still in negotiations with Gaylord Entertainment of Tennessee, which wants to build a $1 billion complex that includes a hotel with up to 1,700 rooms , a proposal that has been on, off and back on the boards for the last couple of years. But the fate of that property is also unknown.


Silver Lining

Reay predicted one upside to the slumping economy is a “greater supply of affordable land as lenders off-load their foreclosed inventory at huge discounts.”

“This will make a lot of sites more appealing and affordable to hotel developers, especially in urban markets where they were competing with condo developers,” he added.

Hotels that opened in the first six months of this year include the 250-room Sheraton Carlsbad Resort and Spa; 200-room Courtyard by Marriott San Diego Airport/Liberty Station, 145-room Homewood Suites in Carlsbad and the 80-room Hilton Garden Inn San Diego/Del Mar in San Diego.

Aside from the new Hilton, hotels under construction include the 250-room Renaissance San Diego Gaslamp Quarter; 239-room Residence Inn San Diego Gaslamp Quarter; 185-room Setai San Diego; 173-room Best Western National City and the 108-room Hampton Inn & Suites Poway.

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