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Hotel Market Insight: Santa Monica

Hotel Market Insight: Santa Monica

Santa Monica, Calif., has gone from beach town to boom town over the past two decades. From the advent of Silicon Beach to the tourist mainstay of the Santa Monica Pier, the city has emerged as a hot spot for development in the greater Los Angeles area.

While the city has historically had a reputation for slow growth, Santa Monica is in the midst of a development renaissance driven by the increasing number of visitors and the city’s vision of being “the premier beach city destination in the world.” The city has taken on several infrastructure projects including the refurbishment of the Santa Monica Pier and City Hall, plus a $55 million public parks project. Currently, 2,000 housing units are under construction. More than 45 projects have applied for development agreements and are in various stages of approval.

City council is currently reviewing proposals to develop a 2.5-acre city-owned site as an unnamed mixed-use project. Situated on Arizona Street between Fourth and Fifth Streets, it will include a combination of retail, cultural, office, hotel, and residential uses. The city hopes to add a cultural aspect within the development by stipulating programmable gathering space that could host public gatherings and seasonal activities for the neighboring community, while preserving space for the city-hosted ice-skating rink that occurs at that site each winter. A parking lot and two banks currently occupy the parcel.

The Ocean Avenue Project, a high-profile 22-story mixed-use tower designed by Gehry Partners, is to be located on the corner of Ocean Avenue and Santa Monica Boulevard. Plans were submitted for development approval on February 28, 2013, and include a twisting white tower with ground-level retail and restaurants, upper-level apartments, condos, and hotel component. The project also contains an observation deck and a museum. With the height and scale of the project exceeding current zoning limitation, there has been significant opposition from community members. It is currently on hold while city council works with the developer to find a compromise on scale.

HOTEL SUPPLY
Santa Monica continues to attract strong interest from hotel developers and investors. The market currently holds 34 hotels consisting of 3,483 hotel rooms. The two largest hotels are the 342‐room Loews Santa Monica, and the 310‐room Le Meridien (formerly Sheraton) Delfina. Most of the hotels are located on or near Ocean Avenue. The most recent hotel opening was the 36-room Palihouse Santa Monica in June 2013, the fourth hotel location in the Los Angeles area for the Pali Group, an independent hotel developer. HVS estimates 5 proposed hotels with 772 units currently in the pipeline.

Several hotel projects are in various stages of development and involve 772 proposed hotel rooms. Two select-service hotels are currently under construction near 5th and Broadway, the Courtyard by Marriott and the Hampton Inn and Suites by Hilton. These hotels being developed by OTO Development, will be among the first new branded select-service hotels proximate to the beach in 20 years, and are anticipated to open in February 2016. Bergamot Hotel is a 90 room hotel that will be part of the Bergamot Art Station (not to be confused with the Bergamot Transit Village across the street) located near the (t)expo line terminus and may house the new home of the Santa Monica Museum of Art. As previously mentioned, the Ocean Avenue Project is slated to include a hotel component with 125 rooms to open in 2019.

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