Hotel Construction Jumps, Openings Dip

IRVINE, CA-California hotel developers started more new rooms in 2006 than they did in 2005, but the number of new rooms that actually opened during the year declined, according to a new report by Atlas Hospitality Group. Alan Reay, president of Atlas, says that the number of rooms under development in 2006 “tops the list for the highest number of hotel rooms we have ever seen under construction” in the 10 years that Atlas has been conducting the survey.

Reay comments that the surge in construction is “a sign of how well the California hotel market is doing,” with lenders and developers both bullish on the state’s hospitality market. The number of new rooms under construction soared 68% to 13,341, according to the report, but new openings dropped by 15% to 3,265.

The boom in construction “is also a good indication of how high sales prices are on existing hotels, which makes the option of new construction much more appealing,” Reay says. “We believe that California is just now making up for many years of very little new construction” and that the new supply will be readily absorbed, Reay adds.

In Los Angeles County, the 1,493 new hotel rooms under way in 2006 represented a 133% increase from the 642 rooms in 2005, but no new rooms opened in the county in 2006. The 372-room Embassy Suites in Glendale is the largest hotel currently under construction in the county.

In Orange County, three hotels totaling 491 rooms open in 2006, the largest of them the 252-room Doubletree Guest Suites in Anaheim. Construction began on 1,213 rooms in Orange County during the year, up 51% from 2005, with Marriott’s 400-unit Newport Coast Villas as the largest hotel under construction in the county.

Hotel construction more than doubled in San Diego County, according to the Atlas report, with 3,770 rooms under construction. The hotels included the 1,190-room Hilton San Diego Convention Center, the single largest hotel under construction in California. Two hotels totaling 129 rooms opened in the county in 2006, compared with 865 rooms opened in 2005. The 86-room West Inn and Suites in Carlsbad was the largest hotel that opened during the year.

Elsewhere in the state, room construction grew by 73% to 647 in Riverside County but dipped by 18% to 610 rooms in Riverside’s Inland Empire neighbor, San Bernardino County. Ventura County posted one of the largest decreases, an 80% drop to 160 rooms under construction, while Sacramento County led Northern California with 1,312 rooms in nine properties under construction.