California’s capital city has a plethora of investment opportunities for hotels and hospitality. With a total of 16,000 hotel rooms in the region, Sacramento has plans to expand in 2020 and beyond. Of the 4,000 rooms in downtown, more than half are within walking distance of the Sacramento Convention Center, while the rest are in a 3-mile radius. A 12-percent Transient Occupancy Tax (TOT) is charged to all hotel stays of less than 30 days in the city of Sacramento. In 2018, Sacramento County collected $303.5 million in state and tax revenue while travel-related spending totaled $4.1 billion, according to Visit California’s economic impact report.
SUPPLY AND DEMAND
Two key conversation points about Sacramento’s tourism and hospitality industry are its limited supply of hotel rooms, which is actively being addressed with optimistic development, and the renovations currently taking place at the Sacramento Convention Center, the main catalyst for the industry locally.
The Sacramento Convention Center closed for construction and renovation in July 2019 and will re-open in November 2020. Additions include a new 40,000-square-foot ballroom and 15,000 square feet of outdoor space, exhibit space, and meeting rooms.
“A lot of our existing convention clients wanted to grow,” said Mike Testa, CEO of Visit Sacramento. “Now, we’ll have a bigger building for them to hold their convention, which means more revenue for them, more delegates for them. It’s a win-win for everyone,” he said.
Both hotels in the immediate vicinity of the convention center were running at 90-percent occupancy two months after the building closed, according to Testa. “Convention and group business [are]valuable in Sacramento, but the demand from transient is huge,” he said.
Arguably even more impressive, Testa estimates that he and his team were able to keep roughly 90 percent of the groups who were scheduled to use the convention center during the renovation period in town and host their events at alternate locations. Some of the groups are annual visitors, which helps, but the retention is undoubtedly a huge win for the city, hotels, businesses, and restaurants. The added benefit of recurring retreat and convention groups having something to look forward to upon returning to the convention center has been beneficial from a relationship-building standpoint as well, Testa said.
HOTELIERS GETTING INVOLVED
As it stands now, the convention center expansion wouldn’t have been possible if it weren’t for the local hoteliers, who agreed to contribute $50 million toward the buildout via the creation of the Sacramento Tourism Infrastructure District, which is essentially a 1-percent tax on hotel stays. The initial plan included the second ballroom to be added later. Two ballrooms and additional halls allow Visit Sacramento to attract and execute more events simultaneously, Testa said.
However, the success of the convention center expansion and other developments is partially dependent on an increase in hotel room supply. So far, all of the area’s hotels have benefitted from the low-supply, high-demand situation. For example, when a new 250-room Kimpton Sawyer Hotel opened in downtown across from the Golden 1 Center, where the NBA’s Sacramento Kings play, none of the surrounding hotels lost any of their market share. In fact, Kimpton has seen occupancy rates of 70-80 percent since opening, Testa said. Ultimately, a plan is in place to create more than 4,000 hotel rooms in the region, according to Atlas Hospitality Group. Just over 1,000 rooms across nine hotels are currently under construction.
Sacramento isn’t just surviving off or relying on business travelers. The city has a wealth of diverse cultural offerings that only add to its mystique. One such event is the Aftershock Festival, which highlights hard rock and heavy metal music, and brings to town annually 40,000 people a day for three days. More than 60 percent of the attendees do not live in Sacramento, according to Testa. The festival committee and Visit Sacramento are currently in talks to establish two other music festivals that will serve an anticipated audience of 360,000 people over a three-week period.
Other Sacramento notables include the 1.5 million acres of farmland surrounding the city that grow roughly 165 crops. As the undisputed “Farm to Fork” capital of the world, it should come as no surprise that the city’s dining scene is making a strong impression on the people who know food best. The renowned Michelin Guide system awarded The Kitchen, a staple in the city’s dining scene, its first star in the summer of 2019. It was a first for the city, where a number of restaurants also received Michelin distinctions. Furthermore, Golden 1 Center will be the site of the World Butcher Challenge in September 2020.
REDEFINING THE AREA
Testa understands and readily admits that Sacramento isn’t as high on travelers’ “bucket lists” like other California cities such as San Francisco, San Diego, and Los Angeles. However, Sacramento represents all the best that California has to offer, he says. Whether it’s food, views, culture, or other, there’s a reason that the city is California’s capital. Sacramento initially came to prominence during the Gold Rush in early 1848. While new hotel rooms and development may not have the same flair as precious metals, there is an undeniably golden opportunity in Sacramento waiting to be encountered.
- 16,000 rooms in the Sacramento area
- Hotels contributed $50 million to convention center expansion
- $303.5M state and tax revenue in Sacramento County (2018)
- $4.1B in travel spending (2018)