Plans for a budget hotel featuring stackable pods near the downtown San Diego waterfront have stalled after port officials decided not to extend negotiations with the developer selected for a project with rare coastal-adjacent rooms going for around $65 a night.
Port of San Diego officials in May 2019 selected a partnership that included Los Angeles-based Stay Open to build on land adjacent to port headquarters, where developers proposed a 33-room hotel with a total of 226 beds — actually self-contained pods resembling a futuristic version of an old-school train sleeper car.
Plans also included shared restrooms, food service and other common areas designed to save on development costs and ultimately consumer pricing.
Plans originally called for the hotel to be built for approximately $10.6 million, but final development costs among other details were never finalized after port officials let lapse an exclusive negotiating period with developers that expired at the end of August. Both sides said this week that the project has not officially been terminated, but it is not currently moving forward.
Among other reasons cited by port officials and the developer, the parties were unable to agree on specific project elements that could keep the project financially feasible — and keep room prices low — in the current climate of rising development costs and supply chain dysfunction.
Also, port officials are now considering the same 3-acre, port-owned hotel site off Pacific Highway for a long-planned regional transportation hub designed to ease commuter access to the nearby San Diego International Airport.
“The exclusive negotiating agreement with Stay Open has expired; however, the parties continue to be engaged in discussions aimed at resolving differences,” Brianne Mundy Page, spokeswoman for the Port of San Diego, said in an email to CoStar News. “Meanwhile, the Port of San Diego continues to pursue opportunities to increase coastal access, which includes the development of affordable lodging for visitors.”
“We remain committed to providing lower-cost overnight accommodations around San Diego Bay while working with our regional partners to make transit to the airport more efficient and convenient,” Mundy Page said.
Port officials in 2018 launched a search for budget-hotel developers, as the region looked to abide by priorities set by the California Coastal Commission calling for more affordable coastal visitor accommodations across the Golden State. Stay Open’s plan was selected from those of several developers that applied for the port-led project, and company officials said the developer has since invested significantly in planning for the hotel.
CoStar Market Analytics data as of Dec. 8 shows the neighborhood near San Diego Bay targeted for the budget hotel has an average hotel room daily rate of approximately $244, among the highest in the region.
“We still believe we can work with the San Diego port district to come up with something for that area,” Stay Open co-founder and Chief Operating Officer Andrew Swerdloff told CoStar News in an interview. “We’ve been focused on more affordable accommodations in these kinds of coastal areas, and we know there’s a need out there.”
Swerdloff said Stay Open has a similar budget-oriented hotel currently operating in the Venice neighborhood of coastal Los Angeles, with rooms going for a below-market daily rate of around $100. It has another planned for nearby Santa Monica and is scouting other Southern California cities where the pod business model with shared spaces can feasibly be deployed, even as rising costs remain a challenge to low-price business models, he said.
Stay Open in 2020 obtained a $2 million seed capital infusion, from a family-run investment firm advised by Apex Capital Partners, to go toward planning a chain of pod hotels. Swerdloff said this week his company will be looking at sites including under-used or vacated retail and office properties that could be converted for low-cost pod lodging.