By Kelli Snyder, Senior Associate at Cushman & Wakefield
Downtown LA has recently seen a boom in new hotels, with more locations on the way. Already, three high-profile sites have been delivered, or are on track to deliver this year – the renovated Hotel Figueroa, the NoMad, and Proper DTLA. Other anticipated openings include the Hoxton, a trendy London-based brand, as well as the upcoming citizenM in the Historic Core.
The recent arrivals reflect a key change in the local market, as development shifts from traditional mainstays (e.g., the Ritz-Carlton, the Westin Bonaventure) toward more boutique options. Many of these newer sites come with unique features geared for the tastes of modern travelers, including spaces meant for community and interaction. Guests at the Freehand Los Angeles can choose premium and regular suites, or they can stay in shared rooms with bunkbeds and lockers. Meanwhile, the upcoming Hoxton will have a communal kitchen where guests can snack and socialize. With WeWork, Airbnb, and Uber having brought sharing into the mainstream, this new generation of hotels seems eager to follow suit.
Inventory grows along with revenues
Several key metrics reveal the strength of the current boom. Right now, over 1,500 keys (rooms) worth of hotel space is under construction downtown, with another 6,500 keys proposed. Meanwhile, RevPAR (revenue per available room) in DTLA has grown by about 23% in the past three years according to Downtown Center Business Improvement District (DCBID).
Occupancy rates and the average daily rate per room (ADR) have also risen consistently. All this comes even as firms keep bringing new projects online, suggesting the market has more room to grow.
Downtown LA: an emerging travel destination
Downtown hotel rates stayed flat for nearly 20 years before the current expansion took off. As a result, brands had little incentive to develop new sites. The market has clearly changed course, however, as DTLA transforms into a major cultural hub.
Before, DTLA lacked many of the attractions— engaging restaurants, shops, venues—which now make it a popular destination. In contrast, the area now has a thriving culinary scene, high-profile museums, and expanded options for nightlife, all of which have established Downtown as a compelling urban environment. Upmarket retailers like Nordstrom Rack, H&M’s upscale brand COS, high-end menswear store LOIT, and boutique Le Box Blanc have also opened up, further boosting the neighborhood’s appeal. DTLA has also benefited from a growing resident base, which helps support higher-end food and beverage concepts. This demand among residents has helped diversify a dining scene that was previously catered primarily to business and leisure travelers.
The downtown revival is driving a shift in traveler preferences. In the past, visitors often saw the neighborhood as a less attractive location. Some business people even preferred booking hotels on the Westside, and would head downtown just for the workday. But as DTLA evolves, travelers increasingly want to explore all that the area has to offer. This growing interest has boosted demand for hotel space, helping to fuel the current boom.
The types of visitors coming to Downtown also seem likely to change. With rooftop cafés, cocktail bars and other lifestyle amenities, spots like the NoMad offer a curated experience that appeals to leisure travelers as well as those coming for business. Expect more travelers coming to see art shows, live music, and other cultural offerings.
Demand likely to remain high
The Downtown hotel market shows few signs of slowing down. Investor demand has been consistent, with new projects attracting strong interest before even hitting the market. And with the industry playing catch-up after many slow years, the risk of oversupply seems low as well. For now, DTLA’s hotel scene should expect more waves of growth, as the neighborhood itself continues to shift and transform.
Kelli Snyder focuses predominantly on investment sales in Downtown LA. She works alongside Executive Managing Director Mike Condon Jr. and the Capital Markets team, with a focus on adaptive reuse transactions on both the buy and sell side.
Kelli and the rest of Team Condon have facilitated the Proper, the Hoxton, and Morrison Hotel deals on an adaptive reuse basis and also most recently brought citizenM to the market for a proposed 300+ key ground-up project. They have already been slated to bring several new ground-up and adaptive reuse hotel sites to the market, so it seems this trend has a long runway for more future successes.