The big game-changer for the local hotel development market would be completion of the planned $520 million expansion of San Diego Convention Center. More conventions being held locally would translate into more demand for hotel rooms.

With an expanded convention center up and running, Rauch said lenders and investors would be more amenable to backing hotel development projects in downtown neighborhoods like East Village and the Embarcadero.

Renovations and Repositionings

“The convention center expansion could be the difference between 1,000 new hotel rooms getting built locally in the next few years, or 3,000 rooms getting built,” Rauch said. “It’s a huge swing.”

For now, Marquis said Pacifica Hotel Co. will be focused on renovations and repositionings of its current properties, along the lines of work now being done by several operators throughout the San Diego region.

It will embark later this year on a renovation of its 128-room Best Western Blue Sea Lodge in Pacific Beach, where it anticipates investing between $2.5 million and $3.5 million, to be followed within the next two years by a similar updating of its 80-unit Sommerset Suites Hotel in Hillcrest.

Marquis said it is not unusual in the current climate for hotel operators to invest $15,000 to $25,000 per room in renovation projects. He said new construction probably won’t go forward in most local submarkets until unused inventory has been fully absorbed.

Pacifica Hotel Co. remains “cautiously optimistic” about future growth in revenue and occupancy, he said. Revenue at the private company’s hotels was up 10 to 20 percent in 2012, and the company is anticipating at least moderate further growth in 2013 and 2014.

It will continue to evaluate development and acquisitions in places like South County, as business activity picks up in that region. Marquis said the company’s Best Western Marina Gateway in National City, for instance, is already popular with Asian business travelers who deal with companies in Mexico, and there could be future demand for more hotel rooms as the cross-border economy matures.

“We are always scouting for opportunities in the San Diego market,” Marquis said.