Market Report Southern California

HVS Report - Southern California Luxury Resort Market - By Leah Dauer Murphy (PDF Download)

Following an extraordinary increase in supply and other challenges of the mid-2000s, Southern California resorts have boasted a strong recovery, with 2014 on pace to be a record-breaking year for group room nights.

HVS Southern California has one of the world’s most attractive coastlines and is renowned for its natural beauty, sprawling beaches, access to entertainment, and pleasant climate. Part of this destination’s appeal is its supply of resort hotels, which range from small limited-service oceanfront properties to expansive luxury full-service golf resorts. Luxury resorts are sprinkled along the oceanfront from Santa Barbara County south to San Diego County and have been performing at record occupancy levels in the last year. In particular, the strength of the resort market and the extraordinary high barriers to entry for new supply – resulting from the difficult entitlement and development process, limited number of oceanfront sites, and high costs of construction – make the area attractive to hotel investors and lenders. 

With the market’s ready access to a statewide population base of roughly 38 million people and a regional drive-in population of approximately 22 million people (10 million in Los Angeles County, a combined 4 million in Riverside and San Bernardino Counties, 2 million in combined Santa Barbara and Ventura Counties, and 3 million each in Orange County and San Diego County), resorts in Southern California are a strong draw for local individuals and groups alike. Easy airport access to four international airports (Los Angeles International (LAX), Long Beach, John Wayne/Orange County in Santa Ana, and San Diego International) provides adequate airlift for both domestic and international visitors. 

Resort demand in this region is driven by meeting and group business (50-60%), with the balance made up of leisure travelers. Meeting and group demand is essentially corporate and incentive in nature, supplemented with social group business. The region’s luxury properties appeal to corporate groups seeking a resort or recreational environment for meetings and events. Given the picturesque locations, easy accessibility, and moderate climate, the California coast as a whole offers a competitive advantage relative to other resort markets in the United States. Wedding groups are attracted to this market for the same reasons. 

With its desirable year-round climate, the market is moderately seasonal in nature. Occupancy levels peak in the mid- to high-80% range in the summer months as vacationing families use school breaks to visit the myriad tourist attractions and beaches. Group meetings account for a larger percentage of occupancy in spring and fall, and the market typically reaches its nadir in the low-50% range in December. Average rate levels follow similar trends as occupancy, with peak demand in the summer allowing for higher rates than those achieved during winter months. 

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