There are plenty of top-level reasons for travelers — and by extension, hotel investors — to be interested in Los Angeles.
The city has an outsize cadenced of mega events compared to even other major U.S. markets along with consistent and long-term leisure demand drivers. But local regulations that affect hotel investments both on the entrance and the exit, along with increasing labor costs and union activity, make the investment outlook more complicated than the demand outlook would indicate.
On the Hotel News Now podcast, CoStar Senior Director of Hospitality Analytics Emmy Hise said the city continues to stand out both in terms of hotel occupancy — which has hovered over 70% for the past 12 months — and rates, and the event calendar remains favorable.
"They have a lot of worldwide mega events happening really every year through 2028," she said, adding 2024 is somewhat muted with just regional NCAA men's March Madness, but the city still has major FIFA World Cup games, the NBA All-Star game and a Super Bowl on tap in the next few years.
But CoStar News' Los Angeles staff writer Jack Witthaus pointed out the major regulatory hurdles the market faces include the mansion tax, which imposes a tax on all real estate trades over $5 million, and an affordable housing law that requires hotel developers to replace any housing units they take offline.
"Developers certainly want to build hotels in Los Angeles, but it's a 'not so fast, my friend' situation," he said. "There's a lot of hurdles to clear in Los Angeles despite the demand drivers we talked about."
For more from HNN's conversation with Emmy Hise and Jack Witthaus, listen to the podcast above, and subscribe to Hotel News Now wherever you find podcasts.