San Diego Business Journal

Pacifica Hotel Co. Pursues New Coastal Development Deals

PROPERTY: Firm’s Focus Is on Renovation Of Existing Properties By Lou Hirsh Monday, May 6, 2013

When Pacifica Hotel Co. recently sold the 73-room Empress Hotel in La Jolla, company leaders said the sale would open up opportunities for the growth-focused firm to pursue new coastal hotel development deals.

Matt Marquis, president of the Santa Barbara-based company, says San Diego County remains on the firm’s radar for long-term development and acquisition opportunities in “water-centric” locations, as the local and national tourism economies continue to improve.

“Places like San Diego have high barriers to entry, so the competition tends to be limited,” said Marquis, whose company operates 25 coastal hotels, mostly in California.

However, Marquis and other experts predict that new construction of hotels will remain at a slow pace for the foreseeable future, despite a hospitality climate that is nearing full recovery from the recessionary depths of 2009-10.

They point to factors including a still tough financing environment for new projects, a glut of room inventory that still exists in some markets, and the potential for federal budget cutting to reduce hotel stays by government agencies and their associated contractors.

“Banks are very skittish to lend right now,” said Jan Freitag, vice president of global development for STR Global, formerly known as Smith Travel Research Inc. He said large resort hotel construction remains scarce nationwide, and the hotels getting built tend to be smaller, limited-service properties in previously underserved suburban markets, overseen by local rather than national developers.

Local Market Lags

STR data indicates that San Diego County’s hotel market tracked ahead of overall U.S. first-quarter figures for occupancy (67.5 percent), average daily rate ($126.74) and revenue per available room ($85.55). However, the local market lagged the nation in year-over-year percentage growth for the period on all of those metrics.

Local hotels posted $447.8 million in revenue during the first quarter, up 1.8 percent from the same period of 2012. U.S. hotel revenue rose 7.2 percent, to more than $27.1 billion.

Robert Rauch, president of hotel consulting firm R.A. Rauch & Associates in San Diego, noted that the local region has seen just a sprinkle of new hotel construction amid the overall tourism recovery. The few openings of 2012 included the Hilton Carlsbad Oceanfront Resort & Spa in Carlsbad, and a Hyatt Place mid-service hotel in Vista.

Following the recent debut of a 250-room hotel at Legoland California Resort in Carlsbad, the only notable large opening expected this year is a Residence Inn by Marriott, currently under construction in Carmel Valley. Rauch said there are several projects in the pipeline in places like San Marcos and downtown San Diego, but they are unlikely to move forward anytime soon.

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