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Hotel report: County to get additional rooms in coming years

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San Diego County is only expected to see 478 hotel rooms come online in 2013, but the figure is projected to jump to about 1,000 in 2014 and as many as 2,000 rooms in 2015.

As noted by hotel consultant and developer Robert Rauch, the hotels coming online in 2013 include the 250-room Legoland Hotel adjacent to the Carlsbad theme park. That hotel is slated to open on April 5, 2013.

To say that the hotel will be Lego-themed is an understatement. A press release on the property says some 3,422 Lego models comprising more than 3 million Lego bricks are featured throughout, including a smoke-breathing dragon at the front of the hotel. The rooms carry themes based on the various parts of the park.

The next largest property coming online in 2013 is the 150-room Marriott Springhill Suites in Oceanside that is scheduled to open in December.

The only other hotel of any size slated to come online next year is the redevelopment of what had been the Seacoast Inn in Imperial Beach. The new 78-room hotel has been branded a Marriott Autograph Collection property that is scheduled to open in February.

In 2014, hotels coming online are expected to include the 400-plus-room expansion of the Harrah’s Rincon Resort scheduled to open the first half of that year. The remaining properties coming online in 2014 are significantly smaller.

“Lots of new product is planned for Oceanside and Carlsbad, including hotels such as the already opened Hilton Carlsbad Oceanfront Resort & Spa and Hyatt Place in Vista,” Rauch said in his report.

A 99-room Fairfield Inn on Palomar Oaks Way in the Palomar Oaks Technology Park is upcoming within a couple of years. Surya L.P. of Scripps Ranch, with Neil Patel of Excel Hotel Group as Surya’s principal, is the developer.

Construction is reportedly just getting under way on a 133-room Holiday Inn and a 106-room StayBridge Suites that will both be built by Bakersfield-based Prime Group Construction for the Alps Group Inc. off Palomar Airport Road at Innovation Way in Carlsbad. A 2014 delivery is anticipated for those hotels as well.

Both Rauch and Alan Reay, Atlas Hospitality Group president, noted that most of these new properties will be business-class hotels.

“I don’t know of any full-service hotels that are planned before 2015,” Reay said.

There is much less certainty looking at 2015 and beyond about the timing and, in some cases, whether the hotels will even happen.

Some of these projects with a less certain timetable include a project with three Hilton-branded hotels totaling 426 rooms called the Inns at Buena Vista Creek at the southeast corner of Jefferson Street and Highway 78.

The Sunterra Development project is proposed to be flagged by Embassy Suites, Homewood Inn & Suites and Hampton Inn & Suites.

Oceanside is also expecting its own 127-room Hyatt Place hotel on the site of the old Bridge Motor Inn, if developer Shantu Patel can obtain the necessary financing.

Further south, one project that is expected to get built is the planned 500-room expansion of the Hilton San Diego Bayfront that would be constructed in conjunction with the second Convention Center expansion.

“That’s not going to come online until 2016 at the earliest,” said Reay. “We’re probably talking 2017 for that one.”

The timetable appears even less certain for the hotel projects at Lane Field and at the Navy Broadway Complex (Manchester Pacific Gateway) where the California Coastal Commission has the final say.

As for whether the Convention Center bookings will be sufficient to justify the new rooms, that remains uncertain.

For now, Rauch said while the Convention Center bookings have been weaker than expected for 2013, leisure business, stimulated by international demand and corporate business from the communications technology and biotech/biomed fields, will keep key submarkets in San Diego strong for the foreseeable future. These submarkets include La Jolla, Del Mar, Mission Bay/Beaches, Mission Valley and the Intersate 15 corridor.

“New pockets of activity are emerging, including the Otay Mesa area, with maquiladora traffic from Mexico and San Diego north, the swath of area from San Marcos and Escondido to Carlsbad and Oceanside and everywhere in between,” Rauch added. "California State University, San Marcos, coupled with the health care industry, have driven (the strength of) those submarkets up dramatically.”

Rauch said the county’s hotel occupancy level should go from 71 percent in 2012 to 71.7 percent next year to 72 percent in 2014 -- all better-than-average figures. The average daily rates are projected to climb from $138 in 2012 to $145 in 2014.

Rauch said the prices for hotels that had plummeted by nearly half in some cases during the recession have rebounded.

HVS Hotel Consultants has projected an increase in San Diego hotel values of 33 percent from 2011 to 2015.

“Interestingly, it appears that hotel buyers are already paying what we believe the values will be in three years,” Rauch said in his report. “The two most recent transactions, a boutique hotel, L’Auberge (Del Mar), and a branded hotel, Courtyard by Marriott (in Mission Valley), have sold for $640,000 and $280,000 per key, respectively. Well located, yes, but the 3 to 5 percent capitalization rates seem low.”

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