Inland Empire on development fast track

NATIONAL REPORT — Driven largely by the growth of distribution centers, prohibitive coastal pricing and low barriers to entry, the Inland Empire has emerged in recent years as a key market for hotel developers seeking new opportunities.

The Southern California region — located east of Los Angeles County and home to some 4 million residents — encompasses Riverside and San Bernardino counties, including cities such as Palm Springs, Ontario, Fontana, Temecula, as well as the Coachella and Victor Valleys. Due primarily to its proximity to Los Angeles, the region has evolved into a major logistics hub.

According to the Q2 2025 Lodging Econometrics report, the Inland Empire is poised for robust hospitality expansion with 122 hotel projects totaling 12,272 rooms in the U.S. pipeline. This ranks the market sixth nationally among the top 50 U.S. markets for hotel construction volume, based on project count.

One global brand company with a strong presence in the region is Sonesta International Hotels Corp., which currently operates 10 hotels, including eight Americas Best Value Inns and two Signature Inns. The Newton, Massachusetts-based franchisor has also signed an agreement for the development of The Royal Sonesta Coachella.

“Sonesta remains bullish on the long-term outlook for the Inland Empire, a region that has evolved into one of California’s most dynamic lodging markets. The area benefits from a wide range of demand drivers that provide both stability and growth across multiple hotel segments,” said Michael Handy, regional vice president of franchise development for Sonesta International Hotels.

It’s a major logistics hub for companies like Amazon, UPS and other corporations involved in distribution and that’s been a big positive. The second factor is that a lot of the population has relocated to the Inland Empire — it’s just much more affordable than the coastal areas.

Alan Reay

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According to Handy, one of the catalysts for development in the region has been the influx of companies like Amazon, FedEx and UPS, which employ thousands of workers and generate a consistent need for lodging — particularly extended-stay options. Furthermore, the region is also projected to grow its population by more than 20% by 2048.

He added that new development opportunities are particularly strong in the Rancho Cucamonga/Ontario Airport area, Temecula, Riverside and Lake Elsinore. Handy described hotel development in the region as “active but balanced.”

Alan Reay, president of Atlas Hospitality Group, noted that his Newport Beach, California-based brokerage firm is “seeing a lot of interest in the Inland Empire.”

He said his company currently has several deals underway in the region, including one near the Ontario Airport. Reay pointed out that the most expensive hotel transaction in California in 2024 was the sale of the 398-room Riviera Resort in Palm Springs, which fetched roughly $58.7 million.

He attributed the region’s rapid growth to several factors, including the logistics boom and population relocation. “It’s just much more affordable than the coastal areas,” he said.

Reay also cited “the availability and affordability of land” as one of the most compelling selling points for developers throughout the region.

Sonesta has 10 hotels in the Inland Empire, including an Americas Best Value Inn & Suites in Joshua Tree.

Palm Springs growth

Palm Springs, meanwhile, continues to draw significant interest. Michael Stathokostopoulos, senior director of hospitality analytics at CoStar Group, described the area as “a major demand generator” within the Inland Empire.

“Palm Springs anchors resort demand with its upscale resorts, golf courses, shopping and signature events like Coachella. The area also attracts outdoor enthusiasts visiting Joshua Tree, local casinos or regional camping and RV destinations,” he said.

The Kirkwood Collection is one such upscale hotel company that has established a strong presence in the Palm Springs market. The Beverly Hills, California-based company’s luxury boutique portfolio includes La Serena Villas in the historic Tennis Club, Del Marcos Hotel, The Three Fifty and The Palm Springs Hotel.

Alex Kirkwood, founder and CEO of The Kirkwood Collection, described the market as an “international destination,” though he acknowledged that maintaining strong RevPAR can be challenging amid rising supply.

Kirkwood emphasized the importance of staying competitive in the area. “Every time there’s an uptick in demand, someone renovates, which pushes the rest of the market. When you’re the new kid on the block, it’s great. You can be an old hotel, renovate and suddenly you’re new again,” he said.

The sale of the Riviera Resort in Palm Springs for $58.7 million was the most expensive hotel transaction in California in 2024.

Growing submarkets

Kirkwood noted that several submarkets have also benefited as travelers seek more affordable alternatives to Palm Springs. “Joshua Tree was on fire for a while, but it seems to be cooling now,” he added.

Another hotspot in the region is Ontario, which is undergoing significant infrastructure development, including the expansion of the Ontario Convention Center, which is set to double its space to 500,000 square feet by the end of 2027. The Ontario Entertainment District, anchored by the Toyota Arena, is also ramping up development, including a new 60,000-seat performing arts venue.

“All of this is definitely going to help going forward and part of the reason you see increased hotel supply is due to these infrastructure projects,” said Stathokostopoulos, who added that group demand has been a “bright spot.”

The Inland Empire offers a compelling combination of corporate, leisure and group demand balanced against a manageable level of new supply.

Michael Handy

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According to CoStar, hotel supply within the Inland Empire remains strong, with about 1,900 rooms across 19 new hotels currently under construction. Stathokostopoulos noted that the most activity is occurring in the Riverside and San Bernardino Center submarket.

While he acknowledged that the Inland Empire is unlikely to sustain its recent growth pace of 5% over the last three years, Stathokostopoulos said it will “still exceed the national average,” projecting roughly 3.4% growth for the region.

“This is definitely more than what you see in other markets in California, many of which have high barriers to entry,” he concluded.

Handy also underscored Sonesta’s continued investment in the region going forward. “Taken together, the Inland Empire offers a compelling combination of corporate, leisure and group demand balanced against a manageable level of new supply. These fundamentals reinforce Sonesta’s confidence in the region as a long-term growth market,” he said.