United States -  San Diego

The San Diego hotel market continues to strengthen, with market-wide occupancy reaching a historical peak for the third straight year at roughly 77% in 2016. This represents a 14-point increase from the market's recessionary low of 63% in 2009. Over the course of the current cycle, RevPAR growth has averaged 6.2% annually; however, slowing growth in both occupancy and average rate resulted in the lowest RevPAR growth in 2016 since the recovery began in 2010. Nevertheless, the market continues to be buoyed by the federal government and the military; in 2016, approximately 22% of San Diego's GDP was related to the military and defense industrial base. Another key factor of the market is the technology sector; according to local officials, the well-established tech sector is expected to grow by 5% over the next five years. Unemployment remains below both the state and national averages and has continued to decline, registering near 4.0%; the area’s unemployment rate decreased by 0.5% percentage points from the third quarter 2016 to the fourth quarter of 2016, representing the ninth largest decrease among major metro areas in the United States.

Demand in the market continues to be balanced. San Diego remains a top-tier convention destination, with the San Diego Convention Center accommodating more than 824,000 attendees in 2016. However, plans to expand the convention center have stalled in recent years, and although another expansion plan will be put to voters in a special election this fall, the project would not be completed until at least 2021. Events like the MLB All-Star Game, which was played at Petco Park, helped drive tourism to record levels in 2016. According to the San Diego Tourism Authority, 34.9 million people visited the area (an increase of 2.0%), and spending reached a record $10.4 billion. Going forward, the degree of demand growth in San Diego may hinge on the federal budget; specifically, it remains to be seen to what degree increases in military spending would be offset by cuts to other federal agencies. Furthermore, the strength of the U.S. dollar could affect international leisure travel. Regardless, the demand outlook for San Diego remains optimistic.

Total supply has increased at a consistent pace, with growth registering between 1.1% and 1.4% each year from 2013 through 2016. Having said that, however, a significant number of new hotels are proposed for the San Diego market. The pipeline includes more than 40 new properties spanning approximately 12,500 rooms; hotels proposed for the market include a broad range of properties across all of the categories. Notable projects include the 400-room InterContinental Hotel, the 1,360-room Navy Broadway Complex, and the Seaport Village Hotels (three hotels that will total approximately 850 rooms). Although the market is somewhat underserved during peak demand periods, the substantial amount of proposed supply could have a major impact on market-wide occupancies and average rates, especially if the convention center does not undergo a contiguous expansion.

Transaction activity in San Diego slowed in 2016. The sale of the Hotel Del Coronado as part of the $6.5-billion sale of Strategic Hotels & Resorts from The Blackstone Group to Anbang Insurance Group was blocked by the Committee on Foreign Investments in the U.S. in October 2016. Remaining transactions for the year were more modest, with the Marriott San Diego La Jolla and the Hotel La Jolla Curio Collection representing the top single-asset transactions at just over $360,000 per room each. This compares to the April 2015 sale of the Fairmont Grand Del Mar at $916,000 per room. Despite this trend, San Diego remains an attractive market for institutional capital, and trophy assets such as the Hotel Del Coronado will continue to draw investor interest both domestically and internationally. Although overall growth has slowed, the outlook for San Diego is positive given strong leisure and group demand and a stable economy bolstered by the federal government.

* 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.

Change In Value For Market:

Legend
Significant Value Increase: Greater than +10%
Moderate Value Increase: Between +3% and +10%
Stable Values: Between -3% and +3%
Moderate Value Decline: Between -3% and -10%
Significant Value Decline: Less than -10%

San Diego RevPAR Change

San Diego RevPAR

Year RevPAR
2006 95.97
2007 101.40
2008 98.93
2009 78.58
2010 81.07
2011 86.87
2012 93.24
2013 97.41
2014 106.53
2015 115.04
2016 119.39
2017 (f) 127.81
2018 (f) 133.59
2019 (f) 137.60

For more information, please contact:

Adam Lair, MAI
alair@hvs.com
  • +1 415 896-0868 (w)
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Aaron Solaimani
asolaimani@hvs.com
  • +1 425 761-1699 (w)
Patrick Bursey
pbursey@hvs.com
  • +1 720 388-9835 (w)
  • +1 619 772-0568 (m)