San Diego Hotel Market Q2 2024: Pricing trends, booking patterns, and short-term rental growth

Hotel pricing in San Diego levels off in the first half of 2024

One of the most prominent trends we saw in 2023 was the ongoing softening in hotel pricing. For San Diego, this trend began at the end of Q1 2023 and persisted through much of the year. The pricing data for the first half of 2024, however, shows that the pricing decline may have reached its nadir, as December 2023 broke the trend of year-over-year (YoY) pricing declines in 2023, with an average actualized hotel price⁽¹⁾ of $190 representing an approximate 3.3% price increase versus December 2022. This was followed by YoY pricing increases in both April and May 2024 as well.

Pricing for the overall US continues to gradually decline

Unlike San Diego, which may be reversing course, the broader US has been experiencing a downward sloping TTM price curve since May 2023. That said, it is worth noting that in comparing the US TTM pricing on a month to month basis, declines appear to be leveling off – TTM pricing for February through June 2024 were all within 80 cents of each other, with the month-over-month declines in TTM pricing shrinking in magnitude with each passing month.

Comparing price from H1 2023 to H1 2024, San Diego exhibits the smallest movement in pricing among regional cities

It’s also worth noting that, other than Las Vegas, which experienced nearly a 5% increase in H1 2024 relative to H1 2023, San Diego was the only major regional market to experience a YoY price increase, albeit a small one. The other Southern California markets examined (Anaheim and Los Angeles) experienced near identical pricing declines of -1.4% and -1.6%, respectively, whereas both Arizona markets (Phoenix and Tucson) experienced more marked declines, with Phoenix approaching -5.0% YoY and Tucson eclipsing the -6.0% mark.

Hoteliers continue trying to drive price in H2

Through the midpoint of 2024 and into July, weekly hotel pricing actualized in 2024 was relatively similar to that of 2023, with some 2024 weeks exceeding the 2023 equivalent (green shaded areas), and others falling short of the prior year’s actualized pricing (red shaded areas). An average of the actualized lowest prices by week of 2024 (through July 29th) shows roughly a $2 premium over the same time period from 2023, indicating some price appreciation, but nothing particularly significant. Despite the resistance to more marked price growth through H1 2024, San Diego hoteliers are appearing to continue to attempt to increase pricing year-over-year, with pricing for the back-half 2024 currently advertised much more noticeably above 2023 actualized levels (see shaded areas).

Pricing still starts at a (lower) premium in 2Q24

When examining the price evolution for San Diego hotel stays in 2Q 2024, the data shows that 120 days ahead of the stay date, pricing was, on average, at an approximate 12% premium relative to the final price (i.e. the lowest rate bookable on the stay date itself).  While this is indeed a significant premium, it’s worth noting that comparatively speaking, the premium is quite a bit smaller than the 120-day lead time premium from 2Q 2023, when pricing was at an approximate 19% premium relative to final price.  The delta, however, between the 2Q 2023 and and 2Q 2024 premiums lessened as stay dates came closer into focus, and from about 2 weeks of lead time onward, the price premium garnered in 2Q 2023 over 2Q 2024 was nominal.  It’s worth noting that at no point over the 120-day lead time window did pricing come in at a discount relative to final pricing for either quarter - for the full 120-day lead time window for both trend lines, pricing was at a premium relative to final price, which diminished over time until the final price on the stay date itself.

Advertised hotel pricing for the next 90 days has largely decreased

Looking back retroactively to April 29, 2024, hotel pricing for the latter portion of 2024 was markedly higher in comparison to where those prices stand currently. Consistent with the resistance that the broader industry has experienced to driving price upward since early 2023, forward-looking destination-wide advertised pricing in San Diego has trended downward relative to where it was back in April. Over the dates in question (August 9th through November 6th), advertised price was an average of 6.3% lower as of July 29th in comparison to price levels for the same dates as of April 29th.

Length of stay search data by lead time

Lighthouse’s search data can be used to create a lead time demand outlook by length of stay (LOS), which can be used to identify booking trends for LOS based on lead time ahead of arrival date. The 60-day lead time outlook for San Diego below, which is an aggregate of all Lighthouse’s 2023 search data, shows that at day 21, three weeks ahead of arrival, San Diego experiences a notable uptick in LOS 4-7 searches, and then on day 14, two weeks ahead of the stay date, there is a significant jump in the ratio of LOS 1 bookings.

Short-term rental supply in San Diego has been growing since mid-2021

However it’s worth noting that short-term rental supply as of June 2024 (just over 13,800 units) is approximately 1.1% greater than the previous peak supply of nearly 13,700 units achieved in January 2020. The aggregation of studio + 1 bedroom units, which is the subset of short-term rentals most comparable to traditional hotel rooms, has actually been declining. January 2020 also represented the peak for 0-1 bedroom short-term rental supply, with just over 7,000 units.

While total short-term supply has marginally surpassed the previous peak as of June 2024, 0-1 bedroom supply was approximately 5,800, indicating short-term rental owners’ preferences for adding larger-occupancy rental units to the market.

From January '20 through June '24, short-term rental ADR in San Diego has grown approximately 66% on a TTM basis

Comparatively speaking, the aggregation of studio + 1 bedroom short-term rental units achieved ADR growth of approximately 48% over the same time period⁽²⁾. Since 2019, the average ADR premium on a monthly basis (not TTM) of all units versus the aggregation of studio + 1 bedroom units has been approximately 91% - nearly double. It’s also worth noting that the all units bucket largely achieves the most significant premium over the summer months in the San Diego market. From November 2023 onward, the all units group achieved an average premium of nearly 105% above the studio + 1 bedroom aggregation. With the supply of larger multi-occupancy units in the market growing, in comparison to the relatively stagnant supply of studio + 1 bedroom units, this growth in the average rate premium is consistent with the supply data.

Occupancy for studio and 1 BR units is similar to the occupancy for broader the short-term rental pool

Through most of the early stages of COVID, occupancy levels⁽²⁾ were nearly identical for the studio + 1 bedroom grouping relative to the aggregation of all short-term rental units. The performance shifted, however, in the fall of 2022, at which point studio + 1 bedroom units, in aggregate, began to achieve a small but relatively consistent occupancy premium of roughly 2-4 percentage points each month (with some sporadic months of very similar occupancy levels).

⁽¹⁾Actualized 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