United States -  Anaheim - Santa Ana

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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. Orange County also supports a diverse base of industries and sectors, including technology, finance, manufacturing, education, and health care. Orange County features 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 (featuring the University of California Irvine campus and numerous corporate headquarters) and the affluent coastal communities of Huntington Beach, Newport Beach, and Dana Point. Each submarket has its own unique set of demand drivers, and the Orange County market has recorded robust demand growth over the last several years. Market-wide occupancy reached approximately 78% in 2018, remaining relatively stable from the prior year. Average rate (ADR) surpassed $162 in 2018, increasing 3.5% from 2017, resulting in peak RevPAR performance of roughly $126 in 2018.

Overall occupancy remained flat as demand increased in tandem with new supply. Only one new hotel opened in the submarket in 2018, which is a decrease from the addition of seven hotels in the prior year. The market's high barriers to entry, including rising land costs and construction costs, continue to limit any major increases in supply. Increased discretionary spending, the popularity of Disneyland, and the return of luxury leisure business to the coastal cities contributed to the market’s improvement. Additionally, strong corporate demand in commercial centers, such as Irvine, boosted overall demand performance. Looking forward, hotel operators anticipate minor occupancy growth in 2019 and 2020 given the completion of the convention center's expansion in September 2017 and expected increases in visitation related to "Star Wars: Galaxy's Edge" at Disneyland, which should support relatively strong occupancy levels. With new attractions anticipated to induce visitation at Disneyland theme parks, a strong citywide convention calendar, and a consistent base of corporate business, ADR growth is forecast to continue at a strong pace.

Positive trends in key performance indicators and anticipated demand growth have prompted a surge in new hotel development, particularly in Anaheim. Following a significant supply increase in 2017, the market experienced only a limited increase in supply in 2018. Nevertheless, a variety of large hotels are under construction with expected openings in 2019; the most notable of these projects include a 613-room Westin, a 466-room JW Marriott, a 352-room Cambria Hotel, a 326-room Radisson Blu, and a 175-room Hilton. With additional supply entering the market, positive expectations for RevPAR growth, and relative stability in capitalization rates, Anaheim/Santa Ana hotel values are forecast to increase moderately in the near term.

While hotel transaction volume was robust in 2017, it experienced a notable decline in 2018, with transactions decreasing approximately 50% that year. Hotel inventory in Orange County ranges from owner-operated budget motels to upper-upscale hotels and resorts in the coastal communities. Given the breadth of product offerings, the pricing of recent Orange County sales has varied tremendously. The most notable sales of 2018 included the 407-room Hyatt Regency Newport Beach, which transacted for $95 million ($232,000 per room) and represents the sale with the highest dollar amount in 2018, as well as the 41-room Laguna Riviera Beach Spa, which transacted for $21 million ($512,000 per room) and represents the sale with the highest price per room in 2018. The outlook for the Anaheim/Santa Ana market is positive due to anticipated high-quality hotels entering the market, high visitation expectations for the Disney theme parks, a 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.

The widespread impact of the coronavirus (COVID-19) has had an unprecedented impact on hotels and hotel values worldwide. Consequently, the latest HVI analysis may no longer reflect the most current measure of lodging industry strength or the hospitality investment market.

In each of our offices across the globe, we are working tirelessly to analyze the impact of recent events and provide timely insights to help you navigate these uncharted waters. Because it is unclear how long the pandemic will last or how long related restrictions will be in place, we are updating our analyses on a weekly basis using the most current data.

Additionally, examination of value trends in prior cycles can provide useful information. Historical patterns, together with an understanding of the market’s current expectations for the eventual recovery of the industry and its performance, can provide insights on the likely trajectory of decline and recovery for hotel values.

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