Despite leisure travel spike, hospitality faces increased costs, recession fears
San Diego County hotels, bolstered by the continued strength of leisure travel in 2023, expressed optimism for 2024 despite increased operating costs and the uncertainty of a national recession, according to data released at the San Diego County Lodging Association’s annual Hotel Economic Forecast Luncheon today.
Leisure travel and increased group travel boosted hotel occupancy throughout 2023, according to economic research by the San Diego Tourism Authority presented at the luncheon at the Westin San Diego Gaslamp Quarter in downtown San Diego.
“Whether there’s a recession, San Diego hotels expect it to be a good year,” said Fred Tayco, SDCLA’s Executive Director. “San Diego continues to welcome a diversity of visitors – whether they come for leisure, business, their kid’s local sports tournament or a convention – the desire to travel and stay in our hotels remains strong. The challenge will be to foster and maintain an environment that supports rather than hinders hotels.”
Prominent industry experts, Nathan Kelley, Research Director for the Tourism Authority, and Bob Rauch, CEO of RAR Hospitality, outlined trends, and potential challenges facing San Diego’s hotel community, their keen insights included:
- San Diego was first across all top 25 markets for hotel occupancy in July.
- Group travel has returned since late 2022 and is expected to improve over the coming year.
- Corporate travel is regaining momentum, a promising sign for 2024.
- The city’s convention and meeting demand continues to recover following the disruption of the pandemic.
- Hotels have incurred significantly higher operational costs – including labor and supply costs – that have driven rates.
- Higher costs and regulations will drive hotels to consider and adopt new processes and programs that enhance and ensure the guest experiences while increasing efficiency.
- New development will remain a challenge, largely due to difficulty with construction financing.
“Despite multiple calls for a recession, the economy shows no signs yet of actually slowing,” Kelley said. “Even if there were a recession, the San Diego market remains highly desirable, so we anticipate a lower impact on area hotels.”
Rauch delved into specific market segments, saying, “While some sectors still face headwinds, the overall trajectory is optimistic. San Diego’s hospitality market uniquely benefits from its position as a drive market to major cities, ensuring continued demand regardless of economic shifts.”
The economic performance of hotels affects the many businesses that rely on hospitality to thrive, including restaurants, entertainment venues and hospitality vendors. Hotels are essential to San Diego’s overall economy. In 2022, hotels generated $361 million in Transient Occupancy Taxes for municipalities throughout San Diego County. This revenue maintains the economic vitality of San Diego and supports thousands of jobs, driving billions of dollars in economic activity.
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