The Valley area hotel market experienced a strong recovery last year, but may plateau this year as economic forces make traveling a harder choice for many people.
Experts say the market benefited from its client base of drive-to-leisure customers, or people driving in for a trip from Northern California or another nearby location. The rest of Los Angeles was hit harder by an absence of customers from Europe and Asia, whom the pandemic prevented from traveling. But the Valley has been somewhat resilient performance-wise compared to the rest of Los Angeles — a market that includes Long Beach, downtown and the Westside.
Although occupancy numbers were up, that is largely a result of the Covid-19 pandemic tanking the market in 2020 and 2021.
“The hotel industry is fundamentally continuing to do well after getting hit pretty hard in 2020,” said James Stockdale, a managing director at the Los Angeles office of Jones Lang LaSalle Inc. who works in the company’s Hotels and Hospitality Group. “Especially in the first couple of months of the pandemic, the industry got smacked pretty hard, but since then recovered pretty well, so the fundamentals are doing pretty darn well.”
Compared to pre-pandemic levels, L.A. was up about 1% in 2022 compared to 2019 year-to-date numbers, while the Valley is up about 3%.
“We’re not expecting a downturn, just expecting to flatten out and not increase as much as coming out of Covid,” said Robert Feist, vice president of Atlas Hospitality Group in Irvine. “(For 2022), year-to-date business is significantly higher in these markets than (2021) and we expect it to level off and not continue to grow as it has these past two years.”
What’s new
The prospect of building a hotel right now is a bit of a tall order — not only because of the bloated expense of construction materials, but also because of interest rates rising throughout 2022. And although the hotel footprint in the Valley has largely tapped out, there are still a handful of properties that are expected to come online this year as the market fundamentals return to pre-Covid levels.
“If you’re going to get a loan, interest is much higher today, which makes it harder for deals to pencil out,” Stockdale said. “All that said, we’ve seen a couple things open in the San Fernando Valley.”
One was the long-awaited Cambria Hotel in Calabasas, the branding of which developer Richard Weintraub of Weintraub Real Estate chose because of the customization provided.
“I liked that they, in my opinion, do select services one or two levels higher, along with allowing you to put your own personality into the product,” Weintraub said. “So it really allows for less of a cookie cutter project — not that there’s anything wrong with others — and allows it to have more personality.”
Weintraub, who opened the hotel in March, said revenue is ahead of projections so far and that it was a leader in the area in terms of room rate. He has owned the 4.5-acre property for 20 years and decided to put a hotel there around five years ago. Its interior was designed by famed designer Rachael Goddard, who lives in Calabasas and typically handles multi-million-dollar real estate.
“It really feels like a four-and-a-half- or five-star for three-and-a-half-star price,” he said. “The very residential, very high-end interiors done by (Goddard) made it feel very homey. We also designed it so even on a busy street and with the 101 (Freeway, which is nearby), you can’t hear anything in rooms or corridors.”
Weintraub has also redeveloped the Sportsmen’s Lodge Hotel in Studio City and Malibu Lumber Yard shopping area.Â
For its part, Cambria owner Choice Hotels was also pleased with Weintraub’s interest in its brand. In a statement, James Millar, the senior director of design and construction for upscale brands for Choice Hotels, said he knew Calabasas would “resonate with our guests” and cited such corporate headquarters as Cheesecake Factory and Harbor Freight Tools, as well as nearby destinations including Malibu Creek State Park, the Commons at Calabasas shopping center, Ronald Reagen Presidential Library and Thousand Oaks Civic Arts Plaza, as being a factor.
“All of the hotels in the Cambria portfolio offer a sense of space and a sense of place, and Calabasas offers this with its local architecture, picturesque views, thriving arts and culture scene, and points of interest,” Millar said. “The property is ideally situated across four acres nestled between the Santa Monica foothills and Malibu Canyon, positioning guests near some of Southern California’s most beautiful beaches and hiking trails.”
Future sites
Further east, Cambria is setting up shop in Burbank. The Avion Burbank Project will include a 80,183-square-foot, 150-room Cambria Hotel. The $28.5 million project, in which Choice Hotels partnered with S3D Partners LLC, will be located in proximity to Walt Disney Studios, Warner Brothers and the Hollywood Burbank Airport.
In Glendale, the Indigo Hotel at Central Avenue and Doran Street is also slated for construction. The seven-story property will replace a Burger King and adjoining buildings on the property.
In all, four hotels are projected to open this year, adding a total of 432 rooms to the region.
A brand-new Holiday Inn Express on East Colorado Street in Glendale is slated to open next month. Property owner Sinanian Development had previously done multi-unit housing and was intrigued to develop a hotel.
“Glendale is a city that we’re very keen on. It’s very clean. It has a very low crime rate. It’s got some really cool destinations like the Americana at Brand and (the Glendale Galleria) mall, all pretty much walking distance,” said Andy Sinanian, executive vice president of Tarzana-based Sinanian Development. “It’s also got businesses and restaurants all along Brand Boulevard. That area, it’s a place where people can go and have everything within walking distance.”
Sinanian said he felt confident that the Holiday Inn Express would do well in Glendale, which has a robust commercial sector and many established hotels — including the Glenmark Hotel, a seven-story boutique with a rooftop bar that opened on Brand Boulevard in 2021. The city is so replete with hotels that the Glendale City Council enacted a moratorium on new construction in its downtown area last year.
“We’re optimistic that it will do just fine. It’s a limited-service hotel, so it doesn’t have a lot of amenities that more luxurious hotels have, like a restaurant and bar. We have a pool and fitness center,” Sinanian said. “We feel for a limited-service hotel it should do OK given that it is in proximity to downtown L.A., it’s got its own downtown and it’s close to Burbank, which has studios and Universal City. There isn’t a Holiday Inn in Glendale, and the brand is very excited about having a location there.”
Other new or up-and-coming hotels for the Valley include a Residence Inn in Chatsworth and a Hampton Inn in Santa Clarita.
Tempering expectations
Overall, the Valley fared better than the rest of Los Angeles in terms of rebounding occupancy, although the number of new properties is a small fraction — 15% — of the county’s overall development pipeline.
 Regardless, the market is expected to cool as high interest rates and the cost of materials make it harder for developers to justify projects, said experts.
“There aren’t many developers willing to go into the Valley,” Feist noted. “They can’t forecast enough topline revenue to support building the project. The cost to build is so expensive and the business isn’t there.”
Inflation has further contributed to this belief, as consumers are more likely to hold off on recreational trips and nonessential travel.
“I do believe interest rates are going to have a negative effect on spending power,” Feist said. “
Still, new construction isn’t dead and there remain opportunities for growth as more businesses and corporations start to call the Valley home. Feist said businesses throughout the Conejo Valley area — Newbury Park, Moorpark, Thousand Oaks and Agoura Hills — will also likely serve as another strong market for hotels.
“Higher-end markets along the 101, which include Woodland Hills, Ventura Boulevard, Encino and Sherman Oaks and across to Burbank and Glendale, are seeing significant planning and construction activity,” Feist said. “Universal City is a bit tapped out.”