San Diego Hotels, Workers Still Driving Economy

SAN DIEGO COUNTY – Behind the staying power of the more than 500 hotels, motels and resorts in the region, the $1 billion local tourism industry continues to be a leading economic driver for the county.

Hotel revenue helps maintains the economic vitality of San Diego and supports thousands of jobs, driving billions of dollars in economic activity. Last year, area hotels generated $418 million in Transient Occupancy Taxes for municipalities throughout the region.

It’s been a rough road for the hospitality industry in climbing back since COVID-19 and the challenges it brought, but with the pandemic largely in the rear-view mirror, there has been growth with room for more in the industry says San Diego Tourism Authority Director of Research Nathan Kelley.

Sharing a snapshot from a July 2024 report from management analytics firm STR at the 2025 San Diego Hotel Economic Forecast event on Sept. 4 at the Embassy Suites by Hilton in La Jolla, Kelley said that San Diego led the country in terms of occupancy and is a leader in several other metrics.

“We were third across the country in terms of top 25 (markets), and that was across the board,” he told about 125 hospitality executives.

The county had a couple of tough months with a drop in visitors in January and February of this year, Kelley said, but made up ground in March and April.

“Current year to date, we’re doing pretty well, we’re still in the top five… and about where we’d expect to be for an entire calendar year,” Kelley said. “It’s been a good year on balance, but it’s been chopped here and there, a little bit less consistent and little more up and down.”

The July snapshot also showed that San Diego was behind only Oahu and New York City in ADR or average daily rate (the metric hospitality leaders use to show the average revenue earned for an occupied room on a given day) and third in RevPAR (revenue per available room, the metric used to measure a hotel’s financial performance).

STR’s lodging performance snapshot calendar year to date through July showed San Diego fourth behind New York, Oahu and Miami in occupancy, sixth in ADR and fifth in RevPAR.
Bob Rauch of R.A. Rauch & Associates, and a nationally recognized hotelier with more than 40 years of hospitality-related management experience, shared some statistics along with insights at the event.

He said the occupancy rate in San Diego County was 76.8% in 2019 and is headed toward 74% in 2024, up from 73.7% in 2023. Average room rates were $166.44 in 2019 and are headed toward $212, up from $210.02 in 2023.

By year-end 2024, San Diego hotels are forecast to see a RevPAR increase of 1%, according to commercial real estate services company Coldwell Banker Richard Ellis. This results from an estimated minor increase in occupancy of 0.1% and a 0.9% gain in ADR.

Year-end San Diego RevPAR will be 22.4% greater than the 2019 year-end RevPAR level of $125.61.

Other Insights, Trends with AI, VR

Looking at trends moving forward, Rauch said the hospitality industry will face challenges from inflation, requiring innovative cost management strategies while maintaining service quality. He suggested that technological advances through Artificial Intelligence and automation are embraced to enhance efficiency and guest experiences.

Rauch also noted that hospitality workers (as well as those staying at hotels) are looking for more green technology and a forward focus on sustainability, eco-friendly practices and wellness initiatives.

He said “hyperpersonalization” via Virtual Reality and Augmented Reality are helping deliver more return on investment by providing more opportunities to build relationships with customers and more.

“‘Smart rooms’ and the Internet of Things integration are transforming the hospitality industry by enhancing guest experiences and improving operational efficiency via voice-activated commands to control room features,” he said.

Rauch also said that hospitality executives should be paying attention to the quantum shift from Baby Boomers and Generation X to Gens Y and Z.

“Brands are responding with more products, short-term rentals are competing more favorably, cruises, glamping, yurts and even the soft brands are competing with different and tech-savvy features,” he said.

Increased Costs, Labor Shortages

Fred Tayco, executive director of the San Diego County Lodging Association, said the hotel numbers between ADR and RevPAR are “looking very good in comparison to 2019 numbers, which shows that we are coming back and in many cases we are back.”

But Tayco said “the big story for the industry” is the difference in operational costs for hotels, motels and resorts between 2019 versus where it is today.

“Labor, electricity, water all of it,” he said. “When we look at our numbers compared to 2019, they show a tremendous amount of progress, but we are still dealing with the increased costs and that’s really what’s holding the industry back.”

Despite the ongoing challenges of labor costs and labor shortages, and rising operational costs needed in running lodging establishments, San Diego’s hospitality sector is expected to remain resilient, Kelley said.

San Diego’s recovery since Covid-19 has been faster than nearly every other major U.S. market and “is about the only market that is meaningfully above the average in terms of demand… and actually punching above our weight” in demand, Kelley said.

“(San Diego) is expected to hold onto those gains over the next several years,” he said, also pointing out the coming 1,600-room Gaylord Pacific Resort and Convention Center in Chula Vista providing a bump in demand when it opens in spring 2025.

San Diego County Lodging Association
FOUNDED: 1980
EXECUTIVE DIRECTOR: Fred Tayco
HEADQUARTERS: San Diego
BUSINESS: Trade association
MEMBERS: More than 80 hotel properties
EMPLOYEES: 2
WEBSITE: lodgingsd.com
CONTACT: 619-678-1195
SOCIAL IMPACT: Through the SDCLA and industry’s initiative, community events food drives, educational opportunities for high school students.
NOTABLE: SDCLA helped with San Diego County leadership to provide rooms and amenities for people affected by the winter 2024 floods.