Hospitality Recovers: Now What?

The San Diego hospitality market has rebounded from the setbacks of the recession. Still, according to the panel at our San Diego Hospitality Summit, challenges remain, such as how to make San Diego more competitive with other California markets.

To that end, our panelists discussed how to attract visitors—especially convention visitors—and how to make San Diego a less difficult place to develop new product. Snapped: Padres chief marketing officer Wayne Partello and Pacifica Companies VP-hospitality acquisitions Len Howell, who does hotel deals within Pacifica. Wayne says that for the revitalization of East Village, the impact of Petco Park has been significant. Baseball's the thing, of course, but there will also be non-baseball events there to attract visitors in the off season. Paul McCartney played there recently; still to come this off season are Holiday Wonderland in December, as well as Motocross and Supercross in January and February. 

CohenReznik’s Marshall Varano, who is the San Diego leader of the firm’s hospitality practice, and San Diego Tourism Authority CEO Joe Terzi. As of August, local hotel occupancy was 78%, which is one indicator that San Diego’s hotels have climbed out of a difficult situation that began with the recession, according to the panel. Investors are interested again, and the time is coming soon when at least one hotel is going to sell for more than $1M per door—and maybe more than one property in the near future. It’s tough to buy, though, because owners are making too much money to want to sell.

Allen Matkins partner Val Hoy, who moderated, and who chairs his firm's hospitality practice. San Diego is still lagging other key US markets in some ways, the panel noted. That’s because the market's slow to take advantage of certain growth opportunities, such as encouraging more international travelers to come here. There are about 12 million international arrivals to LA every year, and seven million to San Francisco. San Diego has less than 500,000. International arrivals are good for local hospitality—and other parts of the economy—because they stay longer and tend to spend more money. 

Portman Holdings SVP Roger Zampell and Zephyr Partners COO Chris Beucler. There’s more capital coming into the market, especially for deals in the urban core, the panel noted, but not quite as much in the suburbs. So the potential is there for more development, especially by international capital. But local political and business leadership needs to agree on ways to move projects more quickly through the pipeline, however, since the system tends to slow down or even stymie projects for little good reason.

Partner Engineering and Science principal Mark Lambson, another of our moderators, along with Lowe Enterprises EVP Matt Walker and Dealy Development CEO Perry Dealy. There’s been some hospitality development in North San Diego County, though mostly limited-service properties, and infill projects are in the works Downtown. That’s a high-barrier-to-entry market, the panel said, so the risk of overbuilding is small. In fact, as things stand now, hospitality supply is relatively limited, creating pent-up demand across the county. 

San Diego still has great advantages as a destination, the panel stressed. One attraction that they cited is the booming restaurant and brewery scene. Restaurants are now focusing on healthier menus and locally sourced items, which is what diners want, and the North County has so many craft breweries these days that it’s a destination in its own right—not quite Napa, but important enough for Highway 78 to be known nationwide as the Hops Highway.