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Should California developers tap into the hotel market?

It seems that people across the country, including many here in California, are spending more time in hotels. In fact, Marcus & Millichap reports that as of the middle of 2018, the number of occupied rooms across the country has increased approximately 70 basis points. Since hotels seem to be performing well, developers may want to tap into this market.

STR, a research firm, reports that the revenue per available room rose to $98.17 this July. In fact, the revPAR, as it is called, has continued to rise over the last 101 months, and may even break the current record of 111 months reached back in the 1990s. These numbers continue to rise despite fears by some that too many hotels are being built.

The reason for these encouraging numbers may have to do with the low unemployment rate in the country and the growth in consumer confidence. Travelers are booking rooms, along with corporations who book blocks of rooms at a time. In July alone, approximately 120 million hotel rooms were rented out on a nightly basis. Despite these numbers, development has slowed, but certainly has not stopped.

Developers here in California who may be moving into other markets may decide to get into the hotel building business. If that is the case, they may need to better understand the laws, rules and regulations that govern this particular type of development. Taking steps to avoid any complications or delays in the future could make the difference in a profitable project and one that fails to meet expectations.

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