United States -  Los Angeles - Long Beach

Los Angeles, California, is a major global center for 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 47.3 million visitors in 2016. The strong growth in visitation, along with induced demand from displaced residents associated with the Porter Ranch gas leak, allowed the market to reach record market-wide occupancy levels in 2016. Market-wide occupancy exceeded 81% in 2016, increasing more than 2.0% from the prior year. Average rate surpassed $171 in 2016, increasing nearly 8.5% over 2015, and resulted in peak RevPAR performance of nearly $140.

Los Angeles is experiencing a period of economic strength and expansion, primarily led by the tourism industry and ongoing development projects. The area benefits from optimal year-round weather conditions, as well as miles of beaches. Universal Studios Wizarding World of Harry Potter, which officially opened in April 2016, and the expansion of the Metro system, should support this trend. Additionally, a $3-billion stadium is currently under construction in Inglewood; it will be the new home of the recently relocated Los Angeles Rams and former San Diego Chargers for the 2020 season. Looking forward, operators are anticipating further declines in occupancy in 2017 because of the lack of inducement from the one-time Porter Ranch gas leak and the addition of new supply. Further moderation in occupancy is expected in 2018 and 2019 as the market absorbs new supply and stabilizes to supportable occupancy levels. Meanwhile, average rate is anticipated to surpass prior peak levels because of new luxury and upper-upscale hotel supply shifting the market's product mix, strong corporate demand, and continued growth in overall visitation to the county.

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. Notable hotel openings in 2016 included the conversion of the 600-room Hacienda Motel to the 246-room Aloft and 185-room Fairfield Inn by Marriott. Hotels currently under construction include the 900-room InterContinental Wilshire Grand, scheduled to open in the fall of 2017, and the 170-room Waldorf Astoria Beverly Hills. With supply entering the market, positive expectations for RevPAR growth, and a modest increase in capitalization rates, Los Angeles/Long Beach hotel values are forecast to remain relatively stable in 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 26 hotels totaling over $940 million in transaction volume sold in 2016, including such significant assets as the Loews Santa Monica Beach (highest total price at $485 million) and Marriott Manhattan Beach for $80 million. Thus far in 2017, seven hotels have transacted, including the Sunset Tower Hotel, which sold in March for $118 million ($1.4 million per room) and the $36-million transaction of the Duke Kimpton Hotel Wilshire in February. The outlook for the Los Angeles/Long Beach market is positive due to anticipated high-quality hotels entering the market, visitation expectations for the county, the strong base of corporate demand, and favorable economic conditions throughout Southern California.

* 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%

Los Angeles - Long Beach RevPAR Change

Los Angeles - Long Beach RevPAR

Year RevPAR
2006 $85.49
2007 $92.04
2008 $91.09
2009 $73.35
2010 $78.94
2011 $88.43
2012 $98.29
2013 $105.12
2014 $116.00
2015 $126.08
2016 $139.60
2017 (f) $140.26
2018 (f) $143.74
2019 (f) $146.57

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)