With Slate Of Major Sporting Events Coming Up, LA Is 'Not Ready For Company'
When Los Angeles Mayor Karen Bass received the Olympic flag at the closing ceremonies of the 2024 Games in Paris, the countdown to the 2028 Olympics and Paralympics in Los Angeles began for real.
But while the Olympics have been functioning as a sort of unofficial deadline for everything from transit projects to major convention center renovations, it isn't the next major event the city is set to host. The deadline for the city to prepare for the eyes of the world is two years earlier when Los Angeles will host eight matches of the FIFA World Cup in 2026 at SoFi Stadium in Inglewood.
The global soccer competition is expected to bring 180,000 out-of-town visitors to the city, according to a report published by the LA Sports & Entertainment Commission. The Super Bowl is set to return to Los Angeles in 2027, also at SoFi Stadium.
But with all these new visitors slated to descend on the LA area in less than two years, the Los Angeles County hotel sector is facing major headwinds, Atlas Hospitality Group President Alan Reay said.
LA County saw an 80% decline in sales volume in the first half of 2024 — the steepest decline in sales volume statewide, Reay told the audience at the Casitas creative office complex during Bisnow’s Los Angeles State of the Market Conference Sept. 24.
“That obviously says that buyers are not seeing what they think are opportunistic buys,” Reay said.
Sales volume was down statewide by 48.5% year-over-year at the midway point of 2024, a report from Atlas found. Reay attributed the decline in part to a disconnect between buyer and seller expectations on pricing and higher interest rates.
Reay also said distress in the hotel market is common, estimating that of the state’s roughly 10,000 hotels, a fifth are in default of some kind, whether on the basis of debt service coverage ratio or a technical default. Lenders aren't being pushed to enforce notices of default, Reay said, so they aren't.
New hotel projects also face challenges.
“From a hotel standpoint, so many hotel investors are not looking to be in Los Angeles, [with the] mansion tax being one of the major issues, trade unions and then just the regulations,” Reay said.
Over the summer, a major hotel union went on strike, sporadically walking out and picketing in front of their workplaces.
The city of LA is also weighing a mandatory pay increase for approximately 23,000 workers at large hotels and Los Angeles International Airport that will bring their minimum wage up to $30 an hour in time for the Olympics.
Reay told the Los Angeles Business Journal earlier this month that there are about 29,000 hotel rooms in the pipeline in the LA area, down from more than 42,000 at this time in 2020. He said only a portion of those in the pipeline will get built.
“We’re not really ready for company,” The Hollywood Partnership President and CEO Kathleen Rawson said, speaking generally about the city’s infrastructure and streetscape.
Rawson said the city is “a case study in deferred maintenance,” referring to the kind of maintenance that affects how people experience the city, such as street cleaning, sidewalk maintenance and new lighting.
Rawson and other boosters underscored the importance of looking to the Olympics as one of many major events set to come to Los Angeles and using these events as an opportunity to revitalize the city’s brand.
“If we do not show well on the world stage for the World Cup, that’s going to have a profound ripple effect,” LA Tourism & Convention Board President and CEO Adam Burke said. “We can’t wait for ‘28.”
