United States -  Los Angeles - Long Beach

Overview:

Los Angeles, California, is a major global center business, entertainment, international trade, media, fashion, science, technology, and education. The Los Angeles hotel market (defined as Los Angeles County) includes a variety of dynamic hotel submarkets, ranging from world-famous luxury destinations in Santa Monica and Beverly Hills to smaller and more industrial areas to the south in Long Beach and to the east in the San Gabriel Valley. Each submarket has its own unique set of demand drivers and barriers to entry, but as a whole, the Los Angeles market has recorded strong growth over the last several years, with the county reaching a new record of 45.5 million visitors in 2015. The strong growth in visitation and demand allowed the market to reach record market-wide occupancy levels in 2015. Moreover, market-wide average rate growth has experienced above-inflationary growth in the past several years, with a new peak established in 2015.

Los Angeles is experiencing a period of economic strength and expansion, primarily led by the tourism industry and ongoing development projects. Universal Studios Wizarding World of Harry Potter, which officially opened in April 2016, should further support this trend. In addition, sporting events play a large role in the greater Los Angeles market; teams based in Los Angeles include the Lakers and Clippers of the National Basketball Association, the Dodgers and Angels of Major League Baseball, the Kings of the National Hockey Association, the Galaxy of Major League Soccer, and collegiate teams such as the UCLA Bruins and USC Trojans. In recent news, a $3-billion stadium is planned for a location in Inglewood; it will be the NFL's largest stadium by square feet. Developers of the stadium envision transforming the 298-acre site into a multi-billion-dollar entertainment, retail, and housing complex, with the stadium and a performing arts venue as the centerpieces; furthermore, it is expected that the venue will be able to host indoor events, such as the NCAA Final Four and the NFL Pro Bowl, combined with conventions and awards shows. Expectations for consistent transient demand and solid meeting and group business related to the proposed Los Angeles Convention Center (LACC) expansion are also anticipated to support strong demand levels.

The Los Angeles market continues to receive a wave of long overdue new supply. Most of this new supply is concentrated in the Downtown submarket, where over 5,000 hotel rooms are in various stages of development. Several other submarkets are recording new supply growth as well, including South Bay, Santa Monica/Marina Del Rey, Beverly Hills, Westwood, West Hollywood, Hollywood, San Gabriel Valley, and Playa Vista. Given the market’s high occupancy levels and the limited amount of new supply over the past two decades, we anticipate that the new supply will be readily absorbed and that market occupancy will remain healthy through the near term.

The investment landscape shows brokers and bankers hungry for good-quality assets, specifically in the Beverly Hills, West Los Angeles, and Santa Monica hotel markets, with particular interest from international investors. Transaction activity remains strong in Los Angeles County; approximately 27 hotels totaling over $1.0 billion in transaction volume sold in 2015, including such significant assets as the SLS Beverly Hills (highest total price at $195 million) and Malibu Beach Inn (highest price-per-room basis at 1.7 million per key). Los Angeles is a diverse hotel market offering an array of products, attracting an assortment of hotel guests, as well as hotel investors. Similar to other major markets in Southern California, the healthy occupancy levels and increasing average rates are anticipated to help hotel values appreciate in 2016 and 2017, albeit at a slower rate than in the recent past. However, despite the expected year-over-year demand and revenue growth through the projection period, hotel values are anticipated to decline slightly in 2018, in line with higher capitalization rates and the expected shift in the capital markets.

* 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:

Los Angeles - Long Beach United States
Previous Year +8% (4 of 71) +1% (49 of 71)
Growth in 2017 +4% (4 of 71) +2% (36 of 71)
Growth in next 4 years +16% (13 of 71) +12% (32 of 71)

Change In Value For Market:

Los Angeles - Long Beach 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)
Greg Mendell
gamendell@hvs.com
  • +1 203 561-6094 (w)