A pair of developers from California and Utah have teamed up for a large hotel complex in one of California's highest-performing hospitality markets.
EKN Development Group, based in Newport Beach, California, and Layton, Utah-based Garn Development are planning a dual-branded hotel project totaling 215 rooms in Monterey, a coastal area that's seen just three hotel openings since 2017.
California's coastal hotels have outperformed urban areas in the wake of the pandemic, with Monterey counting an average daily rate of $187, above the national average of $151 and making it one of California's best performing hotel markets, trailing just four cities: Napa, Hollywood, Santa Monica and Newport Beach, according to CoStar data.
In another sign of strength for the market, the developers received $67.1 million in financing for the project during a challenging time for hotel loans.
“In this economic climate and inherent stricter loan requirements, the demand for innovative financing methods and sources are crucial to the success of all projects,” said EKN Development CEO Ebbie Khan Nakhjavani n a statement.
The planned Marriott Courtyard Residence Inn in Monterey's Sand City will include a 127-key Courtyard by Marriott and an 88-key Residence Inn by Marriott.
Lack of Construction
The project's room count is roughly equivalent to the total number of rooms that have opened in Monterey since 2017. There are just two hotels under construction in the area, according to Emmy Hise, senior director of hospitality analytics at CoStar Group.
Hise notes there is demand among travelers and investors for dual-branded, select-service and suite-type hotels with "efficiencies that help with profitability."
Hise added that “for this project specifically, it could fill a hotel type that is underrepresented in the market," and said 60% of the hotel rooms in the market are independent.
"Only 10 hotels among the nearly 250 hotels in the submarket have more than 200 rooms, meaning that larger hotels could be a missing piece of the area. Most of the hotel rooms are economy or luxury. These brands offer an in-between option," Hise said.
In contrast to Monterey, the more urban San Francisco market has struggled to recover from the pandemic. International travel represented approximately 20% of arrivals to the city prior to the pandemic; that market isn't projected to recover until after 2025, according to CoStar market analytics.
For The Record
JLL Capital Markets arranged the financing for the project.