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San Diego Hotels Climbing Out After Sinking Lows

By Lori Weisberg, The San Diego Union-Tribune
August 31, 2010

Defying increasingly somber reports that the economic recovery is faltering, San Diego’s hotel industry is expected to make a slow but steady comeback this year and next as growing numbers of consumers and businesses return to travel after a long, painful drought, say forecasters.

By year’s end, San Diego County’s beleaguered hotels are expected to see a 2.7 percent spike in revenues, just a year after experiencing a 21 percent plunge, according to the latest forecast released by Colliers PKF Hospitality Research. Only three months ago, the Atlanta-based firm had predicted a 4.1 percent drop by year’s end.

By next year, the news is even better for the local lodging industry, which can expect an 11 percent surge in revenues.

The Hilton San Diego Bayfront is among many local hotels that are seeing occupancies rise.

No question, hotels large and small have suffered mightily during the economic downturn, and it will be years before they see a return to pre-recession profits. But suddenly, prospects for better times ahead appear much brighter, Colliers PKF believes.

A similarly rosy outlook is forecast for the nation as well, with revenues and occupancy levels expected to rise at healthy rates.
The abrupt change in thinking both nationally and locally was fueled by an unexpected increase in demand among business and leisure travelers, reinvigorated by some of the lowest hotel rates seen in years, say PKF analysts.

“We’ve done some testing, and we do think rates are remarkably low relative to long-term averages,” said Robert Mandelbaum, director of research information services for PKF. “Rates nationally are now comparable to what people were paying in the 1990s. There was so much discounting in 2009, they’re now a bargain, so we think that’s eased people’s concerns about traveling.”

While average hotel rates are expected to gradually rise in the coming years, consumers should not despair over the prospect of a quick end to deep discounting. Local hoteliers say they are more interested in boosting their occupancies for now and fear any sudden increase in room rates could put a chill on future business.

The PKF report shows that average daily rates for San Diego County hotels will rise to nearly $133 next year but won’t surpass the previous high of $147.85 in 2008 until 2013. That is also the year in which revenue per available room — an important barometer of the lodging industry’s financial health — will return to its previous peak, which was in 2007.

“The recovery is so tenuous that as a general rule, hoteliers are saying, ‘I want to build the occupancy back up, and I don’t want to scare anybody away by raising rates,’ ” said Gordon Luster, general manager of the Hilton Mission Valley. “So value rates will be here for another 12 to 18 months, except for during high occupancy periods like Comic-Con.”

The rising optimism among forecasters is driven in part by the growing inclination of corporations to once again hit the road to conduct business. For the past couple of years, business travel rapidly evaporated, and companies looked for ways to pare expenses during the recession.

For the rest of the story and a PDF download of the National and San Diego hotel forecast please visit:


Lori Weisberg, Staff Writer
San Diego Union-Tribune
350 Camino de la Reina
San Diego, CA  92102

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