Los Angeles hotels are less valuable on a per-room basis than those in 13 other U.S. cities including San Francisco, San Jose and New York, according to a recent study.
In better news for hoteliers, though, the value of L.A. hotels is expected to grow faster over the next three years than values in any other region besides Long Island, N.Y.
Hotels in L.A. County were worth an average of $11,676 per room in 1996, according to Minneola, N.Y.-based HVS International, which computes an annual index by dividing a hotel’s total value by its number of rooms. The index is an indicator of rising or falling values in hotel markets.
Hotels in New York City are the most valuable in the nation, worth an average of $61,405 last year, according to the index. San Francisco ranked second at a per-room value of $35,983, and San Jose was third at $30,268. Orlando, Chicago, Boston, Oakland and San Diego were among the other cities with more valuable hotels than L.A.
Nonetheless, HVS projects that hotel values in L.A. will grow by 189 percent between 1996 and 2000. Only Long Island, with a projected value growth of 239 percent, ranked higher in growth potential.
“You’re looking at strong and growing demand in the Los Angeles market over the next few years, along with no significant new builds,” said study co-author George Goldhoff.
Although other studies show the downtown hotel market lagging behind the rest of L.A. County in occupancy and room rate growth, Goldhoff said projected demand for downtown hotels was a major factor in his growth projection. The possibility of a new sports complex and other developments such as Disney Hall are expected to boost the downtown hotel market.
Southern California’s recovering real estate market is also key in making the hotel market more attractive, said James Schmitt, an analyst with Westcountry Financial in Camarillo.
“The scarcity of Los Angeles real estate makes its hotels more valued than other places where there’s more room to build,” said Schmitt. “I would say that investing in Los Angeles hotels right now would be better than investing in stocks.”
The average per-room value of L.A. County hotels rose 52 percent between 1995 and 1996, according to the index.