Commercial Real Estate Market Report: Hospitality in Los Angeles County, CA

[Manuel Angeles]

Market Overview
The Los Angeles hospitality market showed strong recovery and growth in Q1 2024, with key performance indicators demonstrating significant improvement from the previous year. The average daily rate (ADR) reached $199.65, a 5.5% increase from Q4 2023, while revenue per available room (RevPAR) grew by 5.6% to $147.84. Occupancy rates remained robust at 74.1%, outperforming the national average by 0.9 percentage points.

Asking and Effective Rent (ADR and RevPAR)
ADR for all tiers is projected to grow steadily over the next few years:
- 2024: $193
- 2025: $197
- 2026: $200
- 2027: $204
- 2028: $209

RevPAR is also expected to show consistent growth:
- 2024: $155
- 2025: $160
- 2026: $163
- 2027: $166
- 2028: $169

Upper-tier properties command a significant premium, with ADR forecast to be $233 in 2024, compared to $122 for lower-tier properties. This gap is expected to widen over time, reaching $251 vs. $133 by 2028.

Competitive Inventory, Employment, Absorption
The Los Angeles hotel market comprises a diverse mix of brands, with Marriott (44.5%) and Hilton (28.2%) dominating market share. Other significant players include IHG (10.5%), G6 (4.9%), and Choice (4.8%).

Total room inventory has been relatively stable, with slight fluctuations:
- January 2024: 103,379 rooms
- February 2024: 107,068 rooms
- March 2024: 103,353 rooms

Employment trends show gradual improvement:
- 2024 projected employment growth: 0.9%
- 2025 projected employment growth: 0.5%

While population growth is expected to remain flat, household income is forecast to grow by 4.4% in 2024 and 3.5% in 2025, potentially supporting increased travel and hotel demand.

Market Outlook
The Los Angeles hospitality market is poised for continued growth and stability:
1. Occupancy rates are projected to remain strong, stabilizing around 81% for all tiers by 2025-2028.
2. ADR and RevPAR are expected to grow steadily, with upper-tier properties seeing slightly higher growth rates.
3. The market is likely to benefit from improving economic conditions, including rising household incomes and stable employment growth.
4. Limited new supply additions suggest that existing properties may continue to enjoy favorable market conditions.
5. The gradual recovery of international travel and tourism could provide additional upside for the market, particularly for upper-tier properties.

However, potential headwinds include:"
- Flat population growth, which may limit organic demand increases
- Economic uncertainties that could impact both business and leisure travel

Overall, the Los Angeles hospitality market appears well-positioned for sustained performance improvement over the next several years, with upper-tier properties likely to see the strongest gains in ADR and RevPAR.

Full Market Report: https://d2saw6je89goi1.cloudfront.net/uploads/digital_asset/...

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