LA Hotel Development Balks at Inflation, Interest Rates

While hotel development across the state has stalled, Los Angeles leads in new hotel openings and lodging under construction ahead of the 2026 FIFA World Cup and 2028 Olympics.

Los Angeles County had the highest number of new hotels that opened among California counties last year, with five, the Los Angeles Business Journal reported, citing a report from Atlas Hospitality Group. The county also led in the number of newly opened rooms, with 607.

That’s 56 percent fewer than the nine hotels and 1,370 rooms that opened in 2023, in tandem with a statewide slowdown blamed on higher interest rates and the high cost of construction.

Despite the challenges, the county leads the state in hotel development, with 23 hotels and 2,833 rooms under construction — up from 18 hotels with 2,162 rooms under construction in 2023.

The 300-room Kali Hotel, Autograph Collection, in Inglewood, is the largest under construction, and is expected to be completed next year.

The 150-room Cambria Suites Burbank by Choice Hotels was the largest hotel to open last year.

Hotel developers in L.A. County now have 199 projects with 27,457 rooms in the pipeline, down from 225 hotels and 33,372 rooms in 2023, according to Atlas Hospitality, based in Newport Beach.

“There is not a lot of land, so it really comes down to buying existing buildings and repurposing them,” Alan Reay, president of Atlas, told the Business Journal. “That means that you’re also in competition with multifamily developers.”

In addition to the increased cost of borrowing and construction, the hotel industry in California has had an uptick in loan defaults secured by hotels, or in hotel bankruptcy, according to Atlas.

The firm predicted the future for hotel construction will remain weak in the near term as investors focus on picking off existing hotels at discounts.

High-end hotels were more likely to get financed than projects intended for budget travelers, Reay said, as the cost of construction is relatively the same for both, and “building a budget or a mid-priced hotel in Los Angeles” won’t pencil out.

For some, Los Angeles’ commitment to hosting major events could bode well for the local hotel industry.

“I think we’re seeing some slight optimism in the Los Angeles market right now,” Alex Kuby, associate principal at DyeLot, a Long Beach-based architecture firm that designs interiors for hotels, told the Business Journal.

“I think Los Angeles experienced kind of a complex moment in hotel development… but you have major upcoming events like the 2026 FIFA World Cup and the 2028 Olympics that are fueling investment and demand.”

— Dana Bartholomew