Here’s Why So Many New Hotels Are Under Construction in Sacramento

Sacramento Business Journal
07/25/19

Here’s Why So Many New Hotels Are Under Construction in Sacramento
By Emily Hamann

https://www.bizjournals.com/sacramento/news/2019/07/25/heres-why-so-many-new-hotels-areunder-construction.html

Sacramento is in the middle of a hotel building boom, according to data released last week by Irvine-based brokerage Atlas Hospitality Group.

The group tracks new hotel construction and the sale of hotels. According to its midyear survey, hotel construction is booming across California.

Throughout the state, 36 hotels have opened so far this year, a 38% increase year-over-year. The number of hotels under construction is up 28%, and the number of new rooms went up 25%.

In Sacramento County, there are now 32 hotels, with 4,191 more rooms, in the planning stages, an increase of 20% over last year. Earlier this year, the 124-room Hilton Garden Inn Sacramento Airport Natomas opened its doors, as well as the 105-room Home2 Suites by Hilton in Roseville.

There are nine more under construction, which will add 1,045 more rooms between them, in addition to major hotel expansions in the works at both Thunder Valley Casino Resort near Lincoln and Cache Creek Casino Resort in Yolo County.

Atlas president Alan X. Reay said there are a number of factors behind the surge in hotel construction.

“California hotels are enjoying record profits as well as record revenues,” he said.

In addition, the price of buying existing hotels has gone up, to the point where it often makes more sense to build a new one. That’s despite increased construction costs — Reay said that between high labor costs, high materials costs and tariffs on the Chinese-made furniture favored by hoteliers, the cost of building a new hotel has increased 15% to 20%.

Still, low interest rates and the promise of high revenues means building a hotel is a better bet.

And developers now are willing to wait for that bet to pay off.

“Developers today, they’re really investing for the long-term,” Reay said. Whereas before, many builders put up new hotels with the intention of selling them right away, now developers are building them to own.

“Long-term, they see California as being a very good place to be,” Reay said.

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