top of page

California's Hotel Sector: A Mixed Bag of High Occupancy, Rates, and Recovery Challenges

California's hotel industry is navigating a complex landscape marked by high occupancy and rates, yet it faces distinct challenges in fully recovering to pre-pandemic levels compared to other states. This intricate scenario is detailed in CoStar Analytics' latest report, authored by Emmy Hise.

California's High-Performing Hotel Market: A Closer Look

As of August 2023, California's hotel sector is outshining many others in the United States in terms of occupancy levels and average daily rates (ADR). This impressive performance, however, is juxtaposed against a backdrop of national travel normalization trends. While the state boasts some of the highest metrics in the industry, its recovery trajectory is more tempered when compared to nationwide progress.

Regional Variances Within California

The state's diverse geography and tourism offerings lead to varying hotel market performances. San Diego, Los Angeles, and Orange County have demonstrated remarkable resilience, each achieving over 70% occupancy on a trailing 12-month basis. In contrast, San Jose and San Francisco, despite showing significant year-over-year growth, remain among the least recovered destinations in the country.

Economic Factors and Trends Impacting the Sector

The broader economic climate, including shifting leisure travel patterns and financial pressures on consumers, is reshaping the hotel industry's landscape in California. The end of the "revenge travel" phase, coupled with increased living expenses and credit card debt, is leading to more budget-conscious travel decisions. This shift has especially affected leisure destinations, which observed minimal growth or declines during the summer months.

The International Travel Equation

Another factor influencing California's hotel market is the pattern of international travel. With many Americans opting for international trips after years of domestic travel, the state did not witness a commensurate rise in inbound international tourism. This discrepancy is a critical element in understanding the current dynamics within California's hotel sector.

Luxury Demand and ADR Gains in Select Areas

Notably, certain regions like the California Central Coast have seen significant ADR gains, a testament to the high-end resorts' ability to attract luxury demand. Orange County and San Diego follow closely, indicating a robust market for upscale accommodations in these areas.

Forecast and Future Trends

Looking ahead to 2024, projections by STR and Tourism Economics suggest a mild recession, which may impact the hotel industry. However, the anticipated revival in group and business travel, coupled with the return of international visitors and sustained leisure travel, could mitigate the effects of this economic downturn.


California's hotel market is a nuanced blend of high performance and ongoing recovery challenges. The state's vast size and varied destinations contribute to a heterogeneous recovery landscape, with some areas thriving while others strive to regain their pre-pandemic stature. With forecasts pointing towards growth in revenue per available room (RevPAR) and ADR in 2024, the future holds a mix of challenges and opportunities for California's hotel industry.

Source: CoStar, MMCG

bottom of page