When it comes to analyzing economic and real estate trends, “Numerology” seeks to uncover reality through various measurements.
Buzz: The city of San Francisco, despite its reputation, is California’s hottest hotel market in terms of the growing demand for rooms.
Source: For the first six months of 2023, I reviewed hotel performance data for 45 counties distributed by Visit California using my trusty spreadsheet.
Fuzzy math: Could this indicate a revival in big city tourism?
Top Line
In San Francisco County, the state’s fourth-largest hotel market, there was a demand for 3.9 million room nights in the first half of the year, a 14.5% increase compared to the same period in 2022.
No other county in California experienced double-digit gains in hotel demand, with Santa Cruz coming in at second place with a 7% increase.
Despite the growth, San Francisco County hotels only reached 62% occupancy, ranking at a middling number 23 among the 45 counties. Additionally, the average room rate in San Francisco was $251 per night, the second highest in the state after a 13.7% year-over-year increase.
This appears to be part of a big-city tourism revival, as the largest hotel market in the state, Los Angeles County, also saw a significant increase in demand.
LA’s 14.7 million room nights sold were up 4.9% from the previous year, making it the fourth-best growth in the state. The county achieved a 71% occupancy rate and had an average room rate of $198 per night, a 3.1% increase over the previous year.
Bottom line
These hotel trends favoring urban settings align with the post-pandemic return to normalcy observed across various sectors of the economy.
Increased office work and corporate travel are driving the return of hotel customers to California’s metropolitan areas. The lifting of restrictions on inbound foreign travel has also contributed to the popularity of big cities among international visitors. Additionally, the pandemic-induced preference for vacationing in less crowded urban settings has decreased.
Let’s take a closer look at the hotel business in California’s top 10 markets compared to the other 35 counties, according to the insights provided by my spreadsheet.
Demand: The top 10 markets experienced a 4.7% increase in demand, while the other 35 counties saw a decline of 4.4% over the past year.
Occupancy: The demand in the top 10 markets resulted in a 2 percentage-point improvement in occupancy, with 69% of rooms filled. In contrast, the other 35 counties had an occupancy rate of only 61.5%, down 2.7 points from the previous year.
Price: These trends allowed owners in the top 10 markets to raise room rates by 6.2% to an average of $193 per night. In the other 35 counties, room rates increased by only 1.1% to $172 per night.
It is worth noting that California’s hotel industry performed slightly below the national average.
In California, there were 68 million room nights sold, a 1.7% increase from the previous year, compared to 634 million nationwide, a 2.6% increase. However, California’s hotels had a higher occupancy rate at 67%, while the national average was 63%. Additionally, the average room rate in California was $188 per night, a 4.9% year-over-year increase, compared to the national rate of $154, which increased by 6.2%.
Locally speaking
Let’s see how the other members of the top 10 counties performed in the first half of 2023, ranked by their year-over-year demand growth:
Santa Clara: 3.4 million nights sold, up 5.2% (No. 3 among the 45 counties) with 61% occupancy (No. 26). Average room rates were $174 per night (No. 15), a 14.1% increase from the previous year (No. 1).
San Mateo: 2.1 million nights sold, up 4.8% (No. 5) with 68% occupancy (No. 7). Average room rates were $184 per night (No. 13), a 9.8% increase from the previous year (No. 5).
Orange: 7.6 million nights sold, up 4.4% (No. 7) with 71% occupancy (No. 3). Average room rates were $206 per night (No. 7), a 5.4% increase from the previous year (No. 11).
San Diego: 8.5 million nights sold, up 3.6% (No. 8) with 74% occupancy (No. 1). Average room rates were $202 per night (No. 9), a 5.2% increase from the previous year (No. 13).
Alameda: 2.3 million nights sold, up 3% (No. 10) with 65% occupancy (No. 16). Average room rates were $141 per night (No. 22), a 7.6% increase from the previous year (No. 7).
Sacramento: 1.8 million nights sold, up 2.2% (No. 11) with 68% occupancy (No. 6). Average room rates were $146 per night (No. 20), a 9.5% increase from the previous year (No. 6).
Riverside: 3.7 million nights sold, up 1% (No. 12) with 69% occupancy (No. 5). Average room rates were $198 per night (No. 11), a 2.3% increase from the previous year (No. 27).
San Bernardino: 2.7 million nights sold, down 0.6% (No. 17) with 67% occupancy (No. 9). Average room rates were $125 per night (No. 29), a 3.1% increase from the previous year (No. 21).
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at [email protected]
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