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Hotel Development in the Anaheim, California Area Picks Up, But Lags
the Pace in San Diego, Los Angeles and San Bernardino
By Sandi Cain, Orange County Business Journal Staff
June 2006

Orange County hotel development has picked up in the past year, but still lags the pace in San Diego, Los Angeles and San Bernardino. That’s according to Irvine-based Atlas Hospitality Group’s latest development report, which shows 12 hotels under development in OC this year, compared to 10 a year ago. Atlas, which publishes a twice-yearly development report on the California market, issued its 2006 midyear report last week. 

San Bernardino has seen its pipeline increase 41% to 24 hotels. Los Angeles is up 13% to 50 hotels in the planning stage while San Diego has 47 under development, up 12% from a year earlier.

In all, there are 185 hotel projects in development in nine Southern California counties, up 24% from a year ago. The number of rooms planned for those hotels is up 3.1% to 28,860, reflecting a trend toward smaller hotels. 

Though costs to develop are roughly the same in OC and San Diego, San Diego hotels tend to be more profitable overall, accounting for more development there, Atlas Hospitality President Alan Reay said. San Bernardino’s growth is primarily driven by the Ontario International Airport and surrounding areas, he said. 

Nationwide, the supply of hotel rooms in the first quarter of 2006 grew by 0.3%, with only Washington, D.C., and San Diego posting growth above 1%, according to Hendersonville, Tenn.-based Smith Travel Research, which tracks the hospitality industry. 

During the past 15 years, the average growth rate was 2.2%, according to Smith Travel.

Just three hotels with a total of 520 rooms opened this year in OC. That’s a 0.9% growth rate. OC’s additions were the 252-room Doubletree Guest Suites in Anaheim, the 128-room Staybridge Suites in Lake Forest and the 140-room Hampton Inn & Suites in Cypress.

“The high cost of land and construction is still a driving force in local hotel development,” Reay said.

The only other hotel to open this year in Southern California was a Hilton Garden Inn at San Bernardino. But the pace of hotel openings is expected to pick up before year’s end.

There are 42 hotels under construction in the Southland at midyear, totaling 7,341 hotel rooms. Six of those—with a total of 975 rooms—are in OC. 


Staybridge Suites: new hotel in Lake Forest
As of March, there were 111,456 rooms under construction nationwide, according to Smith Travel. Thirty percent of those were midsize hotels of 100 to 200 rooms without restaurants or bars, such as a Hampton Inn or Comfort Inn. 

In Southern California, roughly a dozen of the 42 hotels under construction are in the midsize category.

About 75,000 new rooms are expected to be added nationwide this year, up 1.2% from a year earlier, according to Smith Travel. But demand is expected to increase by 3.1%, suggesting that higher room rates are on the horizon. Some 94% of hotel investors believe room rate growth will remain strong through 2008, according to a 2006 survey by the Lodging Industry Investment Council, an industry think tank made up of hospitality investment executives.

OC is close to build-out for hotels, said Bruce Baltin, executive vice president of the Los Angeles office of PKF Consulting. “You’ll see limited growth in supply for the foreseeable future,” he said. Baltin said that’s likely to drive spending on upgrades at existing hotels.

OC Debuts

The Doubletree—on Harbor Boulevard near the Anaheim Convention Center—has 7,200 square feet of meeting space, fitness center, restaurant and lounge. A 1,200-square-foot Disneyland Resort Welcome Center opened last week in the Doubletree lobby. Guests can buy park tickets and make dinner reservations or other plans at the center.

The Staybridge Suites opened in April and is geared to business travelers to South County. Room options include studio, one-bedroom and two-bedroom, two-bath units. All have kitchenettes and free high-speed Internet access. The hotel has two conference spaces—one for small meetings of up to 25 people and another for up to 100 people.

A 153-room Courtyard by Marriott in Anaheim is set to open in the next week a block from the Doubletree. The Courtyard by Marriott, which will be managed by Newport Beach-based Tarsadia Hotels, includes rooms geared to kids with bunk beds and other kid-friendly amenities, a business library, 24-hour pantry-style market, heated swimming pool and exercise room. A Ruth’s Chris Steakhouse is set to open at the hotel by fall.

Under Development

Some hotel projects take a decade or more to complete. Others—particularly the midscale hotels without restaurants or bars—go up quickly. Some never go up at all.

“Typically, about 10% of planned projects get built,” Reay said.

Hotels still in the works in OC include a 150-room facility in Huntington Beach that’s part of Los Angeles-based CIM Group’s $90 million commercial and residential development called The Strand. In May, CIM contracted with San Francisco-based Joie de Vivre Hospitality, which focuses on boutique hotels, to manage the unnamed hotel. The hotel, slated to open in 2008, will be Joie de Vivre’s first in OC. It previously was slated to be a Residence Inn.

“The trend of boutique hotels is ripe for Orange County,” Baltin said. 

Work on a 174-room Renaissance ClubSport hotel in Aliso Viejo started in late May. It’s part of the next phase of Parker Properties LLC’s Summit office campus development. Irvine-based R.D. Olson Construction is building the hotel via a joint venture. 

The ClubSport concept—part spa, fitness center and sports complex—was created by Pleasanton-based Leisure Sports Inc., a private developer and operator of high-end sports clubs and hotels in California, Nevada and Oregon. Leisure Sports and Marriott International partnered to launch the hotel-fitness resort concept under the Renaissance ClubSport name in Walnut Creek in 2002. 

Plans for the Aliso Viejo development include a conference area, aquatics center, NCAA-regulation gym, childcare facility and indoor-outdoor bar.

“South County was missing this kind of hotel,” said Russ Parker, vice chairman of Aliso Viejo-based Parker Properties.

Other projects under way in OC include a 65-room Headlands Resort in Dana Point, Makar Properties LLC’s Pacific City Hotel in Huntington Beach, The Irvine Company’s Pelican Hill Inn at Newport Coast and a Starwood hotel by Arcadia-based Kam Sang Co. in Garden Grove.

In May, Newport Beach-based Makar Properties said it would begin construction on the Pacific City hotel this year, with a projected opening in 2007.

Pelican Hill Inn also is projected to open in late 2007.

The first phase of the GardenWalk retail and entertainment complex in Anaheim broke ground last week. Up to three hotels totaling 1,050 rooms are planned for later phases and would be unlikely to open before 2008 or 2009. 

That’s the second-largest planned project in Southern California, behind the Gaylord Entertainment Hotel & Convention Center in Chula Vista, which is set to include 2,000 rooms.

In South County, the Headlands Resort also is part of a residential and commercial development that will be built prior to the hotel.

A timeshare by WaterMark in Anaheim and another phase of Marriott’s Newport Coast Villas timeshare also are in the works.

The Irvine office of Panattoni Development Co. received the go-ahead in December for a 110-room Hampton Inn & Suites in Seal Beach. 

Around the Southland

Key projects in Los Angeles and Ventura counties include:

The 876-room Marriott Marquis and 124-room Ritz-Carlton in downtown Los Angeles at Anschutz Entertainment Group’s $2.5 billion L.A. Live district next to the Los Angeles Convention Center. 

A 214-room Montage Hotel & Public Gardens in Beverly Hills by Montage Hotels & Resorts and its development partner, the Athens Group of Phoenix. 

In Westlake Village, a 270-room Four Seasons Hotel will open this fall on the 20-acre Dole Food Co. headquarters campus. Tom Gurtner, who managed the Four Seasons Newport Beach before its conversion to The Island last year, will manage the hotel.

Several projects also are under construction in San Diego:

The 420-room Hard Rock Hotel—a partnership between Hard Rock and Newport Beach-based Tarsadia Hotels—is set to open next spring as the first branded condo-hotel in the area. Set in San Diego’s Gaslamp district, the Hard Rock will include a Rande Gerber lounge and sky bar, Nobu restaurant, a spa, fitness center, screening room, music venue and 40,000 square feet of meeting space. 

The Grand Del Mar in North San Diego County, which will include 261 rooms and 39 residential villas at the Grand Golf Club, is set to open next year. 

Construction of a 125-room Residence Inn by Marriott is set to begin this fall in Oceanside at the intersection of Rancho Del Oro Boulevard and Ocean Ranch Boulevard. The hotel will open in fall 2007.

Plans for an 800-room, 40-story hotel at Broadway and Pacific Highway by San Diego developer Doug Manchester were approved last month. 

Sandi Cain is a freelance writer and contributor to the Orange County Business Journal and meetings industry publications. She specializes in hospitality, tourism and travel. Cain holds bachelor’s and master’s degrees in education from Kent State University in Ohio, where she majored in social studies. A former high school teacher, she has written for niche-market sports publications in the U.S., England and Australia and formerly worked in both the printing and high-tech industries. A Cleveland, Ohio native, Cain hasbeen a resident of Laguna Beach since the late ’70s. She enjoys travel, gardening, reading and spoiling her three cats.

Sandi Cain
Laguna Beach CA

Also See: Southern California Hotel Developers Put Hotel Plans on Hold as Land Prices Surge / Sandi Cain / July 2005
Hotel Development in Orange County, California All But Dries Up; Handful of Small Hotels Opens, Little Construction Under Way / Sandi Cain / June 2004

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