IRR-Los Angeles Mid-Year Viewpoint 2015 Local Market Report - Lodging
Compared to other markets, the Los Angeles hospitality market will continue to benefit from its popularity as a tourist destination, especially for international travelers. Los Angeles has some of the most popular and highly visited areas in the world. It is a popular link to the United States for people traveling from Asia and other parts of the world. Los Angeles International Airport is currently in the process of renovating the international terminal to continue to attract visitors from all over the world.
With this, the hospitality industry in Los Angeles County should be more stable in Los Angeles County compared to other counties in the country. Nonetheless, it still seems as if the market is beginning to stabilize after several quarters of recovery from the recession. The fourth quarter of 2014 was one of the most active quarters in years in the hospitality industry, as there were 7 sales of hospitality properties.
Since then, the first quarter of 2015 had only two sales of hospitality properties and there have been 2 so far in the second quarter as well. The average cap rate decreased steadily through 2014, but rates appear to be stabilizing in 2015 so far. Average daily rates and vacancy rates appear to be stabilizing as well, as occupancy rates have fluctuated and average daily room rates are close to the same as a year ago. According to LA Times, there is still a shortage of full service hotels in Los Angeles as many are run down and in need of renovation. According to LA Times, the tourism growth is lacking that of its main competing cities of Orlando, Florida, New York and Chicago mainly due to the insufficient number of hotel rooms especially rooms in close proximity to the convention center. There has only been a minor increase in construction of hotels recently, but still needs 2,000 to 3,000 more rooms in close proximity to the convention center. The problem is there isn't much land to build these additional rooms. Only about 4,875 rooms are within a mile of the LA convention center compared to about 7,695 within a mile of the Orlando Convention Center. Overall, the hospitality industry in Los Angeles County is superior to most markets considering its popularity as a tourist destination and increasing appeal to international travelers.
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IRR Mid-Year Viewpoint 2015 comprises a National Overview report and 300+ two-page Local Market Reports for all key property types as well as additional resources, including metrics methodology, graphs, and tables; these free reports may be downloaded from IRR’s site here.