This year should be a robust one for the local hotel industry. Occupancy should remain at high levels and average rooms rate are expected to climb, according to an annual report done by RAR Hospitality.
However, those trends will be dampened by increasing costs, particularly labor. The chance for the industry to record the highest net income ever will be dashed because labor costs have been rising faster than inflation, the report said. That’s due primarily to the minimum wage hike.
The overall outlook is still favorable, said Robert Rauch, CEO of RAR Hospitality. "If the economy is good, then lodging is good," he said.
The report predicts occupancy rates will continue to hold in the 77 percent range, which was recorded last year. That was the highest in 30 years. And that should be the case even though San Diego continues to add hotels — six in all in 2017. They will add more than 1,000 rooms.
That growth is expected to continue, without negative consequences. “While there are a number of hotels opening in 2018 and beyond, this supply increase is rather muted compared to New York, Los Angeles and many other U.S. cities,” the report said.
Los Angeles is seeing a real boom. Seventeen percent of the 112 hotels in construction in California are located in downtown Los Angeles, according to Alax Reay, president of Atlas Hospitality.
He was one of the speakers at a recent event to highlight the report’s release. RAR Hospitality holds the event annually to give insight into the industry.
While there’s been some concern about a glut of hotel building in downtown San Diego, Reay said those fears are unfounded. “It’s not in trouble,” he said. “We don’t have the same supply compared to L.A.”
One part of the industry that’s seeing a downturn is the number of hotel sales. Part of that is because the Chinese government is cracking down on foreign investment, said Guy Maisnik, partner and vice chair with JMBM, another speaker.
Cash-rich Chinese companies had been big buyers. “That’s dropped,” he said.