SAN DIEGO (KGTV) — San Diego's tourism industry is struggling with declining foot traffic and hotel occupancy rates, threatening the city's budget expectations and potentially leading to job cuts in the hospitality sector.
The Marriott San Diego Gaslamp Quarter, a 300-room hotel in the heart of the city's entertainment district, has seen occupancy rates drop to around 70 percent as visitors stay away from what many consider an increasingly expensive destination.
"I think right out of the gate in 2025 we were expecting a strong start," said Jeffrey Burg, general manager of the Marriott San Diego Gaslamp Quarter.
However, those expectations weren't met.
"It started off weaker than expected and just continued that way through the year," Burg said.
The downturn comes as San Diego increased its transient occupancy tax – the tax visitors pay when staying at hotels or short-term rentals. The tax increase, which went into effect last May, was designed to generate more than $1 billion over the next 10 years to fund local projects benefiting the city.
Instead, the money collected for 2026 is expected to fall short by nearly $7.5 million due to a drop in international travel and more people choosing to stay home.
"City leaders haven't really put the hospitality industry up for success in trying to help us become an affordable city; they've increased prices for the operators," Burg said.
The financial pressures are creating uncertainty for hotel workers across the city.
"I think it's very expensive to come to San Diego. There is a lot of uncertainty," Burg said.
He explained that budget constraints in 2025 kept occupancies lower than normal, and if the downward trend continues, staffing cuts may be inevitable.
"Every other hotel schedules based upon occupancy and demand. So if the demand isn't there, we're not going to be able to provide as many hours," Burg said.
Despite the challenges, the San Diego Tourism Authority remains optimistic. In a statement, the organization said major events coming to the city this year are expected to strengthen demand in the second half of the year.
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