Is This a Cargo Crate or Motel Room? San Diego Port Seeks Cheap Overnight Alternatives

Is This a Cargo Crate or Motel Room? San Diego Port Seeks Cheap Overnight Alternatives

Project Reflects Statewide Push for More Access to the Coastline

BY LOU HIRSH  (via CoStar)

Boston-based Sleepbox, which has set up sleep pod configurations at several U.S. airports, is among three developers vying to build budget-priced hotel accommodations near port district offices in downtown San Diego. Photo: Sleepbox

Boston-based Sleepbox, which has set up sleep pod configurations at several U.S. airports, is among three developers vying to build budget-priced hotel accommodations near port district offices in downtown San Diego. Photo: Sleepbox

Think your last motel room was small? Well, the Port of San Diego is considering a hotel proposal from a company that looks like it might treat overnight guests like cargo, sticking them in sleeping pods that can be smaller than some shipping crates.

If it catches on, a box for the night could be in store for any similar travelers at ports around the United States.

A waterfront site under consideration for development in San Diego is providing a glimpse into how cities across the idyllic California coast might be able to tackle a chronic problem: the lack of affordable hotel rooms on the shoreline.

Three developers are vying to win a chance to construct low-cost overnight accommodations – generally priced year-round between $62 and $113 per night, or a median of $78 – on a 3-acre site owned by the Unified Port of San Diego, which controls 34 miles of prime waterfront land throughout San Diego Bay. The port this year put out a request for proposals for the land between two existing port district administration buildings in the downtown area.

“This should help us increase the variety in the types of hotels we tend to see on port-controlled land,” said Penny Maus, real estate department manager for the Unified Port of San Diego.

Among the proposals is one from Sleepbox, a Boston company that has a chain of private sleep pods, billed as “micro hotels,” at airports nationwide.

Another in the running is a proposal by San Diego-based Shiva Management and Hotel Investment Group (HIG), which have previously built hotels in San Diego’s Mission Valley neighborhood. News reports suggest they proposed a five-story, 199-room hotel on the port site.

The third proposal comes from Los Angeles-based CaRE Development, also known as California Real Estate Regional Center, a government-approved entity that serves as an investment bank for international capital from participants in the EB-5 visa program, which provides green cards to investors of certain projects or businesses, to fund real estate projects throughout Southern California.

While exact proposals haven’t been made public yet, what is ultimately approved at the site could give other cities and entities an idea for how to move forward on their own affordable coastal hotel projects.

The project is part of a larger push to add more affordable hotel rooms on the Pacific Coast that has become a statewide priority for the powerful California Coastal Commission, which regulates development in ocean-adjacent zones and has called on numerous cities over the years to improve public access to popular waterfront areas. It stems from legislation brought forward by Assemblywoman Lorena Gonzalez Fletcher, a Democrat in San Diego, that was signed by then-Gov. Jerry Brown in 2017.

High Nightly Rates

With the cost of oceanfront land among the highest in the state and the location so desirable for travelers, most hotels on the California coast charge high nightly rates that can be prohibitive for some visitors, many of which are inland California residents. Three out of four Southern California residents cited a lack of affordable accommodations on the coast as a problem, according to a 2017 study from University of California, Los Angeles.

“Our beaches and coasts belong to all Californians, regardless of income,” Gonzalez Fletcher said in a statement while lobbying for her bill two years ago. “We have some work to do to make these public assets accessible and affordable for everyone.”

The developable San Diego site, on Pacific Coast Highway near San Diego International Airport, consists primarily of a parking lot that was formerly used by rental car companies as well as a 10,000-square-foot portion of a port district office annex building that is currently not being used.

The San Diego port district is the landlord to more than 600 businesses that lease port-controlled land, including 15 major hotels and resorts with a total of almost 8,000 rooms. Most of those rooms, especially those closest to the downtown convention center, are priced higher than the region’s average – $166.30 per night for full-year 2018, up 3.7 percent from the prior year, according to travel research firm STR. The U.S. average hotel price at year’s end was $129.86 per night, up 2.4 percent.

Maus said that to fulfill the port requirement for low pricing, the winning project is likely to be budget-friendly accommodations with shared service and amenity spaces that are similar to concepts that have been growing nationwide, such as hostels and “micro” bed concepts like sleep pods.

Four development teams submitted formal proposals ahead of the port district’s March 7 deadline, but only three have been deemed complete and eligible for further review by port staff. They are expected to make a recommendation to the Board of Port Commissioners for a selection this year at a public meeting. A date has not yet been set.

The California Coastal Commission in recent years has clashed with several cities over development issues related to new projects, such as blocked coastal views, lack of beach access, and insufficient green space. Last year the commission prevailed in a long court fight with the San Diego port district, which had contended state regulators overstepped their authority in blocking a Harbor Island hotel project over the issue of low-cost lodging.

According to a 2017 study done for the Coastal Commission by research firm Sustinere, 15 percent of San Diego County’s coastal hotel rooms are priced at $112 per night or lower. That’s a much higher percentage than Orange County’s 5 percent but lower than Los Angeles County’s 18 percent.

Combined with at least two other previously proposed private development projects featuring affordable hotels in the downtown area – currently in early planning stages – San Diego port officials are now spearheading their own project that seeks to put a dent in the affordability issue.

Maus said the neighborhood should generally be attractive as a hotel destination to younger travelers and others with a fixed travel budget, since it’s close to the airport, the Embarcadero waterfront promenade, local trolley stops and popular attractions like downtown’s Little Italy neighborhood.

To provide incentives for future budget-oriented hotel construction, San Diego officials are considering ways to deploy “in lieu” fees paid to the state for hotel projects in coastal zones, as part of a fund created by the Coastal Commission in 2017 following passage of the state law authorizing collection of those funds for non-discount hotels projects. The coastal commission has begun distributing those funds to certain local agencies in the state, including the San Diego port district.