Even as hotel development slowed across the state, San Diego County saw a surge in hotel openings in 2025, driven by the debut of the 1,600-room Gaylord Pacific Resort in Chula Vista.
The Gaylord hotel is so large that it almost singlehandedly helped boost statewide hotel real estate performance last year. The megaproject effectively made California totals look especially strong, despite relatively modest levels of new hotel room supply in several other counties, reports Atlas Hospitality Group, which released its year-end development report on Thursday.
Statewide, 50 hotel projects accounting for 7,100 rooms debuted in 2025, compared with 35 properties consisting of nearly 3,800 rooms a year earlier. The contrast was even more marked in San Diego County, where a total of five hotels accounting for 2,034 rooms opened last year, compared with just a single 179-room property opening in 2024, reported Atlas, an Orange County-based brokerage and advisory firm specializing in hotel properties.
Besides the Gaylord resort, other newly opened hotels in the county included Jamul Casino’s first hotel and the Sentral Gaslamp Quarter, which has 135 furnished apartments with hotel-style amenities, designed for short- and long-term stays.
Despite the higher volume of rooms coming online in 2025, the number of newly opened properties locally is slightly below average, compared to the past several years. In 2018, for example, there were seven new hotels and in 2019, there were 10, says Atlas Hospitality.
At the same time, new development continues to slow in San Diego and elsewhere, with 11 hotels under construction last year, compared with 13 in 2024. For Southern California as a whole, 59 properties were in the construction stage last year, compared with 71 in 2024.
“This is happening because investors can buy existing hotels right now at a fraction of the replacement cost,” said Atlas Hospitality President Alan Reay. “So you have potential developers looking at San Francisco, Silicon Valley, Los Angeles, where they can buy existing hotels way below replacement cost.
“And then when you figure in tariffs and everything else, construction costs become very high, so it’s difficult to develop. It’s not just the construction costs, but you also have to provide the fixtures and equipment and furnishings, which are all imported from China, so the tariffs have had a huge impact on costs.”
Developer Ted Eldredge of Manchester Financial Group acknowledges that all those factors continue to delay longstanding plans for a 36-story Fairmont hotel overlooking San Diego Bay. Although plans for the high-rise were unveiled in 2022, construction has yet to take place. Manchester Financial, though, remains hopeful, having recently extended its grading permit from the city.
“Equity and debt markets have been pretty tough because of uncertainty surrounding the financial climate, but equity is the most difficult part,” Eldredge said. “Investors don’t want to take the risk because of the cost of construction due to tariffs, so it’s hard to get a specific bid from a contractor because the cost of steel could change in three weeks.
“A lot of the smart money is chasing existing assets that you can buy much cheaper than it would cost to build. The cost to build is at least double what it would be to buy an existing hotel.”
Reay suspects that it could be some time before development deals in the pipeline translate into new construction.
“We are getting zero calls from anyone saying I want to develop a brand new hotel,” Reay said. “No one is asking, ‘Do you have any land for sale?’ Even though the prime interest rate is coming down, that is trumped by the cost of construction and the availability of existing hotels that are less expensive.”