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 and sectors, 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 the Orange County market has recorded robust demand growth over the last several years. Market-wide occupancy reached at approximately 78% in 2017, declining 0.3% from the prior year because of an increase in supply. Average rate (ADR) surpassed $156 in 2017, increasing 3.9% over 2016, resulting in peak RevPAR performance of roughly $122.
Overall occupancy declined slightly because the new supply outpaced the demand growth. There is the addition of seven hotels in the market, but demand increased by 0.9%. Increased discretionary spending, Disneyland's 60th anniversary celebration, 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, operators are anticipating slight declines in occupancy in 2018 and 2019, as additional new supply enters the market. Nevertheless, the convention center's expansion, which was completed in September 2017, and anticipated higher levels of visitation related to "Star Wars: Galaxy's Edge" should support relatively strong occupancy levels. With new attractions expected to induce visitation at Disney theme parks, a strong citywide convention calendar, and a consistent base of corporate business, ADR growth is anticipated 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, Irvine, and Buena Park. Notable hotel openings in 2017 included the 176-room AC Hotel by Marriott Irvine and 161-room Homewood Suites by Hilton Irvine John Wayne Airport. In addition, the 130-room Autograph Collection Newport Beach Lido House and 271-room Marriott Irvine Spectrum opened in early 2018. Meanwhile, the 175-room Hilton Buena Park is currently under construction. With supply entering the market, positive expectations for RevPAR growth, and a modest increase in capitalization rates, Anaheim/Santa Ana hotel values are forecast to remain relatively stable in the near term.
Hotel transaction volume was robust in 2017 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 upper-upscale hotels in the coastal communities. Given the breadth of product offerings, the pricing of recent Orange County sales has varied tremendously. The most notable sale was the $125-million transaction of the Duke Hotel Newport Beach in February 2017; this hotel was named as Fairmont Newport Beach at the time of transaction. Other notable sales in 2017 included the Pacific Edge Hotel in June at $57.5 million (roughly $528,000 per room) and Best Western Plus Dana Point Inn by the Sea in November for $303,000 per room. Compared to 2016, the number of transactions increased in 2017; however, the transaction volume decreased roughly 30% given that many of the transactions happened in midscale segment. 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, 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.
ADR, Demand, Occupancy, RevPAR, and Supply Projections:
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2019
|
2020
|
| ADR Change
|
+4.0%
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+4.0%
|
| Market Demand Change
|
0.0%
|
0.0%
|
| Hotel Occupancy Increase/Decrease
|
-0.4%
|
+0.4%
|
| RevPAR Change
|
+3.5%
|
+4.5%
|
| Market Supply Growth
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0.0%
|
0.0%
|
