Data Courtesy of CoStar™
Hotels in the Los Angeles market maintain one of the highest occupancy and ADR levels nationally. However, topline hotel performance has shifted from positive to negative. In the past 12 months through April, RevPAR declined by 1.0%. Occupancy and ADR have declined every month this year, resulting in a year-to-date RevPAR decline of over 5%. The first part of 2024 is projected to be the slowest, and RevPAR change is forecast to be nearly flat by the end of the year.
Like many destinations, Los Angeles experienced the first negative RevPAR quarter since 2021 at the beginning of the year. However, the trend continued after the first quarter, with April RevPAR declining by 8.0%, representing the largest monthly decline since the pandemic years.
Lured by beaches, Hollywood, and Universal Studios, leisure visitors are the primary travel segment to the market. The leisure segment that was driving hotel demand has shifted as Americans continue to travel abroad.
Nationally, the shift in performance was due to a bifurcation of upper-tier class hotels growing and lower-tier class hotels declining. Many lower-income families feel the strains of higher expenses, lower savings, and increased debt, resulting in limited funds for travel. However, in the Los Angeles market, every hotel class experienced a RevPAR decline between 3% and 5%, year-to-date April. Luxury and Economy class hotels both experienced over a 5% year over-year RevPAR decline.
12 Mo Occupancy
12 Mo ADR
12 Mo RevPAR
12 Mo Supply
12 Mo Demand
The reduced leisure travel and declines among all hotel types highlight that Los Angeles is still below historic levels in business-generated travel through conferences, conventions, and corporate travel. Also, inbound international travel into Los Angeles is more than 20% below 2019 levels. Inbound international overnight visitors generated nearly a quarter of hotel room night demand in 2019 but now represent less than 20%.
In the long term, hotel demand in the area will show greater strength as Los Angeles hosts mega events that garner worldwide attention. Los Angeles will host eight games for the 2026 FIFA World Cup, the 2026 NBA All-Star Game, the 2027 Super Bowl, and the 2028 Olympics.
High interest rates, hotel union labor strikes, and recent legislation impact Los Angeles hotel development and investment activity. The investment community is uncertain about labor expenses, increased transaction taxes, and consistently changing and newly proposed legislation that impacts hotel valuations and operations.
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