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Tuesday, Dec 5, 2023

Local Hotels Should See Rapid Turnaround

There is light at the end of the local tourism tunnel.

According to CBRE, a commercial real estate services and investment firm, demand for U.S. lodging accommodations will return to pre-coronavirus crisis status in the third quarter of 2022. Specifically, in San Diego, hotel occupancy will drop to 44.7% in 2020, but will recover to 62.6% in 2021, per CBRE’s “Hotel Horizons” forecast report released just days ago.

Brandon Feighner, managing director of CBRE Hotel’s Advisory, based in Los Angeles, said the return of leisure travel this summer will lead San Diego into its first phase of economic rebound.

Strong Recovery

“We are projecting strong recovery in 2021 once more folks start traveling again,” he said. “This will be driven somewhat by folks visiting by car starting this summer. The largest percentage of travelers in California are Californians – they make up more than two thirds of the people staying in hotels, going to amusement parks, etc. This will be followed by the business traveler returning in the fall. And, then, lastly, the big travel groups given government regulations.”

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The last group of the projected recovery plan, which can include masses of 500 to 5,000 travelers to the city, will be predicated on when a vaccine is available, said Feighner. Although, in talking to the San Diego Convention Center, he said the goal is for the city to begin hosting very small conventions as soon as the end of the year. Conventions that have to be rescheduled won’t return till spring or summer of next year, he said.

Desirable Attributes

The reason for San Diego’s positive travel outlook, as Feighner explains it, is San Diego is better positioned than most cities for a relatively rapid economic turnaround because it has highly desirable attributes to the leisure traveler.

“Whether that is going to the beach or an amusement park, which are opening up soon, expect to see a good amount of travelers here very soon,” he said. “We are starting to see it in destinations that have already opened, like areas in the south, that have posted strong weekend occupancy, even exceeding levels in some cases. There is a lot of pent-up demand and now that it is starting to reopen, San Diego will be highly attractive to Californians and those in neighboring states.”

Beaches Recover First

Carl Winston, director of the L. Robert Payne School of Hospitality & Tourism Management at San Diego State University, agrees.

He said, not only will the beaches recover first and business travel last, in the past, San Diego has historically bounced back faster than most other cities in the U.S.

“I think back as far as 9/11 in 2001, and then even 2003, with SARS, and then again the Great Recession in 2008 – San Diego recovered faster than most places,” he said. “And, this has to do with the fact it is a really desirable place to come to. People that live in Orange County and Los Angeles wouldn’t go to Hawaii right now, or the Caribbean – it’s too scary. But you certainly want to go somewhere, and San Diego has a lot to offer. You can easily drive there from Los Angeles, Las Vegas, Phoenix and even Tucson.”

Conventions Return

Winston said recovery certainly won’t be uniformly spread out. He said people likely won’t take a family vacation in the Gaslamp District, for example, and certainly not in a luxury hotel during this time of financial distress. Much like Feighner, Winston believes downtown will see an upturn when conventions return in October.

The Hotel Horizon’s forecast report also stated that, consistent with prior recessions, the decline in demand has affected pricing in San Diego and throughout the rest of the country. It predicts a lag in average daily rate (ADR) growth will stall the recovery in revenue per available room (RevPAR) until 2023 in the U.S. In San Diego, ADR is expected to drop 31.1% to $114.80 this year, and then inch back up again by 11.3% to $127.72 by 2021.

RevPAR is expected to drop 59.8% to $51.29 in 2020 but is likely to jump 55.80% to $78.89 in 2021, it states.


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