United States -  Anaheim - Santa Ana

Overview:

Attracting over 20 million leisure visitors per year, the Anaheim/Santa Ana hotel market (defined as Orange County, California) is home to an array of leisure attractions, but Orange County also supports a diverse base of industries including technology, finance, manufacturing, education, and healthcare. Within Orange County, there are a variety of hotel submarkets ranging from the cities of Orange, Garden Grove, and Anaheim (which surround the Disney theme parks) and Buena Park (home of Knott's Berry Farm) to Irvine (University of California Irvine campus and base for numerous corporate headquarters) and the affluent coastal communities of Huntington Beach and Dana Point. Each submarket has its own unique set of demand drivers, and, as a whole, the Orange County market has recorded robust demand growth over the last several years. Solid growth in attendance at the Disney theme parks, increases in citywide conventions at the Anaheim Convention Center, strong corporate business, and the return of luxury leisure business have all contributed to the market’s improvement.

As occupancy levels have surpassed previous peaks, average rate growth has continued to ramp up and is anticipated to remain strong through the near term. The market is expected to record strong demand growth due to accelerated group business, the expansion at the Anaheim Convention Center, and Disneyland’s 60th anniversary, which commenced in May 2015 and continues through 2016. Positive trends in key performance indicators and the anticipated demand growth have prompted a surge in new hotel development, particularly in Anaheim, Garden Grove, Irvine, and Huntington Beach. Most of the new supply is concentrated in Anaheim and Garden Grove, including the 603-room Great Wolf Lodge Southern California that opened in February 2016. Market occupancy levels are expected to remain healthy, and the imminent new supply should be quickly absorbed.

Hotel transaction volume was robust in 2015 due to hotel investors focusing on coastal resort hotels and assets near the market's main demand generator Disneyland. Hotel inventory in Orange County ranges from owner-operated budget motels to luxury resorts in the coastal communities. Given the breadth of product offerings, the pricing of recent Orange County sales has varied tremendously. However, the most notable sale was the 248-room Montage Resort & Spa Laguna Beach, which sold in January 2015 for $360 million, or roughly $1,450,000 per room; other properties that sold for over $100 million in 2015 include the Marriott Irvine in June and the Hyatt Regency Orange County in October. Similar to other major markets in Southern California, the healthy occupancy levels and increasing average rates are anticipated to help hotel values continue to appreciate in 2016, albeit at a slower rate than in the recent past. Despite anticipated year-over-year demand and revenue growth through the projection period, we expect the value of Orange County hotels to decline slightly in 2017 and remain stable in 2018, in line with higher capitalization rates and the anticipated shift in the capital markets. Stronger values in 2019 should be supported by a lack of new supply coupled with stronger demand and ADR levels.

* The HVI is an index, a statistical concept reflecting a measure of the difference in the magnitude of a group of related variables compared with a base period. As such, it is a measure of broad market trends, rather than a conclusion as to the specific value of any asset, and cannot be applied to an individual asset. A good comparison is the Consumer Price Index. While this index provides a reliable measure of the overall rate of inflation in a region, it does not indicate how the price of milk has changed at your grocery store. So how can the HVI be of use to an individual investor? Although the HVI cannot tell you what a particular hotel is worth, it does provide excellent big picture data, indicating which market areas are experiencing positive trends, and thus may present good investment opportunities. The HVI for the U.S. is a measure of the strength of the lodging industry as a whole and, specifically, the hospitality investment market. The HVI for the various identified markets can provide a basis to evaluate and compare different geographic regions. For more insight on the limitations and applicability of the HVI, please read the message on the HVI home page by clicking on the graphic at the top of this page.

Valuation Trends and Predictions:

Anaheim - Santa Ana United States
Previous Year +5% (11 of 71) +1% (49 of 71)
Growth in 2017 -2% (65 of 71) +2% (36 of 71)
Growth in next 3 years +7% (49 of 71) +10% (36 of 71)

Change In Value For Market:

Anaheim - Santa Ana RevPar % Change

For more information, please contact:

Jessica White
jwhite@hvs.com
  • +1 424 208-1262 (w)
Li Chen, MAI
lchen@hvs.com
  • +1 310 755-8293 (w)
Katy Black
kblack@hvs.com
  • +1 970 305-2229 (w)