San Diego attractions aerial
Balboa Park, the water beyond and Petco Park to the south are just a few of the attractions that continue to keep San Diego’s hotel market strong. Photo credit: Visit SanDiego, via Facebook

San Diego County hotels, bolstered by the renewed strength of leisure travel, expressed optimism for the coming year despite increased operating costs and economic uncertainties.

The San Diego County Lodging Association released its projections at the annual Hotel Economic Forecast Luncheon on Thursday.

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, held at the Westin San Diego Gaslamp Quarter.

Fred Tayco, the organization’s executive director, cited the region’s “diversity of visitors – whether they come for leisure, business, their kid’s local sports tournament or a convention” in keeping bookings up at local hotels.

“The challenge will be to foster and maintain an environment that supports rather than hinders hotels,” he said.

Industry experts, Nathan Kelley, research director for the Tourism Authority, and Bob Rauch, CEO of RAR Hospitality, outlined trends and potential challenges facing the hotel community, including:

  • San Diego came in first across all top 25 markets for hotel occupancy in July.
  • Group travel has rebounded 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 up rates.
  • Higher costs and regulations will drive hotels to consider and adopt new processes and programs for guests while increasing efficiency.
  • New development will remain a challenge, largely due to difficulty with construction financing.

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.”

Kelley concluded, “Even if there were a recession, the San Diego market remains highly desirable, so we anticipate a lower impact on area hotels.”

In 2022, hotels generated $361 million in transient occupancy taxes for municipalities throughout the county.

The economic performance of hotels affects the many businesses that rely on hospitality to thrive, including restaurants, entertainment venues and hospitality vendors, contributing to support for thousands of jobs and driving billions of dollars in economic activity.