Insights

San Diego Hotel Market Q3 2024: Pricing trends, booking patterns, and short-term rental growth

Hotel pricing in San Diego shows signs of a potential pricing upcycle

San Diego hotel prices(1) in Q2 2024 demonstrated clear indicators that the very apparent downward pricing trend may have reached its nadir. Following a stretch beginning in April 2023 when TTM pricing declined month-over-month for 11 out of 12 months, the trend showed signs of reversal, with 2 consecutive months where TTM pricing increased on a month-over-month basis in each April and May 2024. These two positive growth months were then followed by two negative growth months in each June and July, however August and September both demonstrated positive month-over-month growth. With positive month-over-month growth in 4 of the past 6 months, and September's 0.7% growth representing the highest month-over-month growth rate in TTM pricing since February 2023, San Diego may very well past the stretch of rate decline and stagnation and at the brink of a pricing upcycle.

TTM pricing for the overall United States, however, continued along its steady downward slope. This downtrend began in May 2023, and it has persisted through Q3 2024. When comparing TTM pricing each month on a YOY basis, it is worth noting that the YOY declines were -2.3% or greater from March through June 2024, and most recently in August and September 2024, the YOY declines were each less than -1.8%.

Solid regional price appreciation, significantly bolstered by Las Vegas

San Diego hotel pricing, along with the select major regional cities of Anaheim, Las Vegas, Los Angeles, and Phoenix, all experienced positive YOY pricing growth in 3Q 2024. This was a marked turnaround for the major regional cities analyzed - in the first half 2024, all but San Diego and Las Vegas experienced YOY pricing declines compared to H1 2023. While Anaheim’s 0.1% YOY price growth in Q3 is ostensibly flat, it is technically positive and a marked improvement from the -1.4% YOY price decline from H1.

Over the first half of 2024, San Diego’s hotel pricing grew by 0.5% YOY, so the 1.9% YOY growth from Q3 does show some upward acceleration. These pricing gains, however, are dramatically eclipsed by pricing in Las Vegas, where Q3 2024 pricing eclipsed that of Q3 2023 by a staggering 21.9%. This was buoyed by a remarkably strong summer with 11 consecutive weeks of double digit YOY pricing growth, including two weeks where YOY pricing grew by north of 40%.

Hoteliers look to drive pricing in Q4 2024

Weekly hotel pricing in San Diego over the first half of 2024 was largely flat. The weekly YOY increases and decreases balanced out, and the weekly YOY price changes averaged out to -0.1%. In Q3 2024, price appreciation began to build, with average YOY growth of 2.2% over the 14 weeks from the week of July 1st through the week of September 30th.

Hoteliers in the market appear optimistic about Q4. Looking at weekly advertised pricing for Q4, currently advertised prices are an average of 12.0% greater than actualized prices achieved in Q4 2023. If prices actualize at or near these levels, it would be a marked pricing uptick from the first 9 months of 2024.

Q3 2024 pricing starts at a lower premium compared to Q2 2024 (and Q3 2023)

San Diego’s lead time pricing curve for 3Q 2024 took a bit of a shift from that of 2Q 2024. Looking back to 2Q, average pricing at the 120-day lead time mark was at an approximate 12.1% pricing premium relative to final price (i.e. the lowest rate bookable on the stay date itself), and pricing gradually ramped down until the stay date, and pricing was never at relative discount to final price.

In Q3, not only did the 120-day lead time pricing premium decrease to 8.1%, but pricing also flipped to a discount relative to final pricing around 4 weeks ahead of the stay date - whereas in the Q2 pricing curve, average pricing never flipped to a relative discount. Pricing remained at this discounted level until approximately 1 week ahead of the stay date, at which point pricing flipped back up to a modest premium until pricing finalized on the stay date.

Forward looking hotel prices for the next 90 days have largely adjusted downward

Consistent with the price evolution curves we’ve observed in both Q2 and Q3, pricing for Q4 2024, as well as pricing for early January ‘25, has largely adjusted downward relative to where prices stood for those same dates as of 90 days ago. When comparing prices for the 90-day stretch from October 16th through January 12th, advertised pricing as of September 30th was on average 3.0% lower than prices for those same dates as of July 1st. From a day-of-week perspective, Sunday night pricing was the most heavily impacted, with Sunday night prices declining by an average of 5.2% over the aforementioned time period. Thursday nights were the least impacted, though prices still came down by approximately 1.5%.

Short-term rental supply grows (but not studio or 1 bedroom units)

Short-term rental supply in San Diego peaked at 13,700 units in January 2020, right before COVID. As COVID’s impact was felt in the US, short-term rental supply faltered, reaching a supply nadir of approximately 10,600 units in May 2021, a total supply reduction of approximately 22.6% off the previous peak. Comparatively speaking, the peak of studio + 1 bedroom units (i.e. those most comparable to traditional hotel rooms) was achieved at the same point in time (7,000 units in January 2020), and the supply nadir of 5,100 units was reached in February 2022, a similarly sized 26.7% supply drop from peak to trough. As of September 2024, studio + 1 bedroom supply reached 5,900 units, growing approximately 14.6% from the February 2022 trough, but still 16.0% below the January 2020 peak. In terms of total short-term rental units, Supply reached a new peak of 14,100 total units in September 2024, surpassing the pre-COVID peak by 3.0%.

Given San Diego’s reliance on leisure demand, larger multi-occupancy units are the primary focus when it comes to short-term rental supply growth. The aggregation of studio + 1 bedroom units comprised approximately 41.8% of the total supply as of September 2024, which is a clear shift from pre-COVID times, when the studio + 1 bedroom supply aggregation typically amounted to greater than 50% of supply.

Short-term rental ADR growth continues, with market-wide ADR accelerating ahead of studio + 1 bedroom ADR

In the first half of 2024, the total supply of short-term rental units had an approximate average monthly TTM ADR(2) premium of 102.7% over the aggregation of studio + 1 bedroom units. When breaking it down into quarters, however, the average monthly TTM ADR premium was approximately 101.5% in Q1 2024, accelerating to 103.9% in Q2. This trend of total ADR accelerating more rapidly than studio + 1 bedroom ADR persisted through Q3, with the market-wide bucket achieving an average monthly TTM ADR premium of roughly 109.9% ahead of studio + 1 bedroom units. This healthy rate growth is certainly encouraging for owners and operators of multi-occupancy short-term rental units, which experienced a 6-month stretch of ostensibly flat TTM ADR growth from May through October 2023.

Studio + 1 bedroom unit occupancy continues to outperform occupancy of broader short-term rental market

Through the early stages of COVID, occupancy levels(2) were nearly identical for studio + 1 bedroom units relative to the aggregation of all short-term rental units. The performance shifted, however, in the fall of 2021, at which point studio + 1 bedroom units, in aggregate, began to achieve a marginal yet consistent occupancy premium. That said, July is the one month in which the total short-term rental market has historically outperformed the aggregation of studio + 1 bedroom units. Since January 2019, on average, the aggregation of studio + 1 bedroom units has achieved an occupancy premium of 0.9 percentage points over market-wide short-term rental occupancy; however looking exclusively at July over the same time period, the data flips, with the total market, on average, outperforming the studio + 1 bedroom aggregation by 0.9 percentage points.

(1)Actualized lowest price for a given time period represents the average of the lowest bookable rates for a standard hotel room for all hotels within Lighthouse’s data set within the given geography, as of 10 days before each stay date within the time period in question

(2)Lighthouse’s short-term rental performance data is comprised of Airbnb data

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