Big city revival? San Francisco is California’s hottest hotel market, LA is No. 4

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“Numerology” seeks to discover reality within various economic and real estate trends.

Buzz: When it comes to growing demand for rooms, San Francisco is California’s hottest hotel market.

Source: My trusty spreadsheet analyzed Visit California’s hotel performance data for the first six months of 2023 for 45 counties.

Fuzzy math: Is there a tourism revival in the works for big cities?

Top Line

San Francisco County, the state’s fourth-largest hotel market, saw demand for 3.9 million room nights in the first half of 2022, up 14.5% from the same period the previous year.

Despite all of the attention paid to San Francisco’s urban ugliness, no other California city experienced double-digit increases in hotel demand. Santa Cruz came in second with a 7% increase.

Despite the increase, San Francisco County hotels were only 62% full, ranking 23rd out of 45 counties. And it’s still a pricey place to stay, with room rates at $251 per night (the second highest in the state) after a 13.7% increase in a year, the second highest among the counties.

This appears to be part of a revival of big-city tourism. Los Angeles County, the state’s largest hotel market, also saw a significant increase in demand.

LA’s 14.7 million nights sold increased 4.9% year on year, ranking fourth in the state. It ranked second in terms of occupancy, with 71%. Room rates were $198 per night (No. 12), up 3.1% from the previous year (No. 22).

Bottom line

These hotel trends favoring urban settings are consistent with post-pandemic, return-to-normal patterns observed in many sectors of the economy.

Because of increased office work and corporate travel, hotel customers are returning to California’s metropolitan hubs. Foreign travel restrictions have been lifted, and major cities are popular with international visitors. Furthermore, a pandemic push to vacation away from congested urban areas has slowed.

Look at what my spreadsheet says about the hotel industry in California’s ten largest hotel markets versus the other 35 counties.

Demand: The top ten counties have increased by 4.7% in a year, while the other 35 counties have decreased by 4.4%.

Occupancy: This demand helped fill 69% of the top ten rooms, a 2% increase year on year. In the other 35 counties, occupancy was 61.5%, down 2.7 points in a year.

Price: These trends enabled owners in these ten markets to raise room rates 6.2% to $193 per night, compared to a 1.1% increase to $172 in the other 35 counties.

I’ll point out that California hotels fared slightly worse than the rest of the country.

California’s 68 million hotel nights sold increased 1.7% year on year, compared to 634 million nationwide, which increased 2.6%. However, hotels in California were 67% full, compared to 63% nationwide.

And, unsurprisingly, the state was a more expensive stay – $188 per night, up 4.9% year on year – compared to the U.S. room rate of $154, up 6.2% year on year.

Locally speaking

Here’s how the other top ten counties fared in the first half of 2023, ranked by annual demand growth…

Santa Clara: 3.4 million nights sold, up 5.2% (ranked third out of 45 counties), with 61% occupancy (ranked 26th). Rates were $174 per night (No. 15), up 14.1% from the previous year (No. 1).

San Mateo: 2.1 million nights, a 4.8% increase (No. 5) with a 68% occupancy rate (No. 7). Rates were $184 per night (No. 13), up 9.8% from the previous year (No. 5).

Orange: 7.6 million nights, a 4.4% increase (No. 7) with a 71% occupancy rate (No. 3). Rates averaged $206 per night (No. 7) and were up 5.4% year on year (No. 11).

San Diego: 8.5 million nights, an increase of 3.6% (No. 8) with 74% occupancy (No. 1). Rates were $202 per night (No. 9) and were up 5.2% year on year (No. 13).

Alameda: 2.3 million nights, up 3% from the previous year (No. 10) with 65% occupancy (No. 16). Rates were $141 per night (No. 22), up 7.6% from the previous year (No. 7).

Sacramento: 1.8 million nights, up 2.2% from the previous year (No. 11), with 68% occupancy (No. 6). Rates were $146 per night (No. 20), up 9.5% from the previous year (No. 6).

Riverside: 3.7 million nights, a 1% increase (No. 12), with 69% occupancy (No. 5). Rates were $198 per night (No. 11), up 2.3% from the previous year (No. 27).

San Bernardino: 2.7 million nights, down 0.6% from the previous year (No. 17), with 67% occupancy (No. 9). Rates were $125 per night (No. 29), up 3.1% from the previous year (No. 21).