California's Hotel Pipeline Includes 20 Projects for Orange County and 42 for Los Angeles
Mary Ann Milbourn | The Orange County Register | March 24, 2014 2:11pm
March 22--Bob Olson doesn't have a crystal ball about the timing of new hotels, but he may have something even better -- 35 years of hard-won experience in the construction and development business.
Since 1979, when he started R.D. Olson Construction, Olson has been through every recession, every construction boom and every bust. He learned to see the telltale signs of recovery when everyone else was looking the other way.
So in 2010, as the hotel industry retreated into survival mode, Olson landed his first new project since cutting his pipeline in 2006 in advance of the recession. It was a Courtyard by Marriott in Oceanside.
"Truth be told, a lot of people thought it was the wrong move," Olson said. But hotels have a 2 1/2-year lead time, and "I thought the economy would turn."
In 2012, when the industry was just beginning to ramp up again, Olson completed four hotels, followed by seven in 2013. It was the beginning of an industry rush. Altogether, 20 hotel projects are in the pipeline in Orange County and 42 in Los Angeles, according to STR, a hotel industry research firm. That is the most local hotels underway since 2009.
Current projects on the drawing board include:
-- The new Grand Wilshire Hotel in Los Angeles. A mixed-use office, retail and hotel project, the 73-story, 900-room development is being touted as the largest building west of the Mississippi River.
-- In Anaheim, 14 hotels are in various stages of planning and construction. A 120-suite Springhill Suites by Marriott opened March 1.
-- Olson is putting finishing touches on the eight-story, 210-room Courtyard by Marriott in the Irvine Spectrum, due to open in June.
-- Olson plans to break ground in June on the eight-story, 250-room Pacific City Hotel in Huntington Beach. It should open in 2016.
-- Olson was just selected to build the Lido House Hotel, a boutique property on the site of the former Newport Beach civic center that's in the early stages of planning.
This kind of building frenzy typically has marked a peak in the past, with the industry soon after finding itself with a glut of rooms.
Jan Freitag, a senior executive at STR, cited a quote by the late hotel developer John Q. Hammons about the industry's tendency to rationalize why there isn't an oversupply: "The industry isn't overbuilt, it's underdemolished."
But even with all the construction underway, hotel demand nationwide appears to be ahead of supply for the next year or two, Freitag said.
STR data show new-room supply is expected to increase 1.2 percent this year and 1.6 percent in 2015. The supply average over the past 25 years is 1.9 percent.