Opinion
San Bernardino County Hotel Resilience is an Opportunity Zone Investment Opportunity
San Bernardino County (SBC) attracts millions of visitors and tourists every year. Despite a deadly global pandemic, rising political tension and an unpredictable stock market, SBC tourism has shown ongoing resilience compared to pre COVID-19 life. Interestingly, and given a healthy combination of business mix and ‘drive-to’ destinations, tourism in certain parts of SBC continued to grow despite the pandemic.

OPINION
By Sophia Thé — Guest Writer
San Bernardino County (SBC) attracts millions of visitors and tourists every year. Despite a deadly global pandemic, rising political tension and an unpredictable stock market, SBC tourism has shown ongoing resilience compared to pre COVID-19 life. Interestingly, and given a healthy combination of business mix and ‘drive-to’ destinations, tourism in certain parts of SBC continued to grow despite the pandemic.
As the largest county in the United States, San Bernardino County stretches across the golden state of California from the eastern border of Los Angeles County, through the mountains of Big Bear to the Mojave Desert. Its vast 20,000 mile area is spread across 24 diverse cities in the heart of southern California, and bordered by the states of Nevada and Arizona.
The County includes a balanced mix of leisure, business and group related tourism demand. On the transient side, national parks, music festivals, and destination resorts are coupled with a quickly growing business community that includes pandemic-resilient industries such as logistics, defense, and aerospace. Before the pandemic, Ontario International airport was one of the fastest growing airports in the nation by number of travelers.
Since the turn of the century, San Bernardino County has been growing exponentially in all sectors. Tourism spending reached $5.3 billion in 2018, employing over 55,500 workers, as indicated on the county website. Prior to the COVID-19 Pandemic, SBC hotels occupancy trailed Orange County and San Diego County by only 7% and 5%, respectively, as reported by Smith Travel Research (STR).
The Pandemic
The County provides a good example of how focused political leadership can drive positive results. The diversification of business, coupled with ‘drive-to’ accessibility of local resorts, and the strength of the logistics sector powered by the three international logistics airports continued to get ‘heads in beds’. Per STR, when compared to all other SoCal Counties, SBC closed 2020 as the leader in hotel occupancy at 59%, followed by its neighbor Riverside County at 50.8%. Total room revenue in SBC declined 21.5% from 2019, versus San Diego County and Los Angeles County where revenue decreased 53.7% and 52.6%, respectively. Interestingly, while occupancy decreased from 2019, total available room inventory increased by 0.7%.
Freddy Bi, Vice President of Sales and Marketing at Inland Empire Tourism Council, points to proactive local political leadership driving a healthy Chain Segment mix in San Bernardino County as a leading cause for business resilience: “Hotels in the Inland Empire are well positioned, with inventory that is in the economy to upper midscale hotel segments and limited inventory in upper upscale – which enabled the region to absorb the impacts of COVID-19.” Due to the industrial makeup of the region, unbelievable demand in manufacturing and logistics helped to sustain the market, and the reduction in corporate travel was quickly replaced by new demand to house frontline workers in response to COVID-19.”
The pandemic highlighted the unrivaled resilience of the hotel industry in SBC. Recent national press highlighted a consumer shift to outdoor drive-to destinations and, logically thinking, between Joshua Tree, Big Bear Lake, Lake Arrowhead, San Bernardino National Forest, and the Mojave National Preserve there are thousands of miles of fresh air and beautiful landscapes that attract both summer and winter clientele.
According to Visit California Data, from January 2020 to January 2021, customer demand for hotels in the Inland Empire only changed -4.1%, a very small decline when compared to areas like Los Angeles and Orange County that saw -43.5% and -58.6% decreases in hotel demand respectively. The average hotel demand decline in California during this time period is -41.5% These data reveal that not only is San Bernardino doing better, it’s also doing 37.4% better than the rest of the state.
Nevertheless, the reality is not uniform throughout the County. While some cities that depended on convention business saw a double-digit decrease in hotel revenue, STR reported Colton, Redlands, and Hesperia closing 2020 as the top performers with 7.1%, 3.4%, and 3% revenue increases from 2019. As an additional point of interest, Hesperia, a town located at the edge of the ‘mountain path’ and adjacent to Joshua Tree and the Mojave Desert, had its hotels increase Average Daily Rate (ADR) by over 7% from 2019. Even before the pandemic, the economy of Hesperia has been steadily increasing. Per DataUSA, from 2014 to 2018 there was a 17.3% increase in median household income in Hesperia, and a 21.3% increase in median home value. This is just one example of a local community that should be considered by investors given recent data.
Rhonesia Perry, Economic Development, County of San Bernardino and Board Chair for Inland Empire Tourism Council, is proud of the collaborative work that the County, the cities, hotel owners, and tourism stakeholders in the region: “It is a testament to the great community of professionals we have in our hotels and at venues throughout the county that the community was able to pivot and work together; as many individuals in the hospitality industry employed.” While we have a long way to recovery, the numbers speak for themselves on the long term potential that hotel owners and investors have in our region.”
Opportunity Zones
Coincidentally, or maybe not, all SBC cities that performed at or above 2019 hotel occupancy have a strong Opportunity Zone (OZ) presence, which introduces an even higher incentive for investor attraction. According to data provided by Esri, of the more than 2 million residents of SBC, over 330k live in OZs and have a median household income of $35.7k. Approximately 68% of the OZ population is Hispanic origin and 12% are Black, versus the general SBC population which is 55% Hispanic Origin and 8% Black. Another interesting metric is the population median age being 28 in the OZs, vs 33 in the larger County.
The county counts 57 qualified Opportunity Zones census tracts, spread throughout 15 cities and the unincorporated areas. In line with the general County, diversification is a recurring theme in the local OZs as well, with local industries such as cannabis and film production, in addition to world class medical research at Loma Linda and defense production in the high desert. Virgin Train, the Boring Company, Coca Cola, and Blackstone are just some of the companies that invest large checks in local opportunities.
The Future
The strength of the local real estate market coupled with a business friendly local government is assumed to result in increased future demand in hotel investment. Unlike many other markets, where the cost to build (replacement cost) per room could be above market average, San Bernardino may remain an attractive place for ground-up construction given the ongoing availability of undeveloped land and access to talented labor. Governor Newsom’s focus on California’s inland counties coupled with the long list of over 300 State and Federal incentives and loans for OZ projects will enable smart investors to leverage the current economy to invest in truly distressed communities, creating good hotel jobs while achieving attractive long-term financial returns.
Contributed by Sophia Thé, Local Equity, an Economic Development Organization specialized in Opportunity Zone Investments, Ontario, California.
Economy
Will The U.S. Economy Fall Into Recession In 2023?

Will The U.S. Economy Fall Into Recession In 2023? Only If The Fed Intensifies Current Tightening Policies; Consumers To Make Up For Weakness In Other Parts Of The Economy
California On The Verge Of Recovering All Jobs Lost Since Pandemic; Investors Buying Up Larger Share Of Homes In The Inland Empire
The U.S. economy has little chance of falling into a recession this year or next unless the Federal Reserve raises interest rates more than they are currently projecting, according to a new forecast released yesterday at the 13th annual Inland Empire Economic Forecast Conference, hosted by the UC Riverside School of Business.
“Although there are signs of stress in parts of the economy, the wealth created by the excessive fiscal stimulus enacted in 2020 and 2021 continues to drive a consumer consumption binge that will propel the economy forward,” said Christopher Thornberg, Director of the UCR Center for Economic Forecasting & Development and one of the forecast authors. “The only possible thing that could tip things downward in the near-term is if the Fed applies even more aggressive quantitative tightening to control inflation than they’re now projecting.”
If the Fed stamps out inflation in the near-term by forcefully reducing its balance sheet, it will drive up interest rates, cool financial markets sharply, and possibly create a modest recession next year led by consumer cutbacks, according to the new outlook. However, in the longer term, if Fed action is inadequate, the United States may be looking at several years of very weak growth, with consumers in a relatively poor financial position at the end.
“This is now a balancing act,” said Thornberg. “Functionally speaking, policymakers went from maximum acceleration – the stimulus – to maximum braking – tightening by the Fed – over a single year, something that would create turbulence in even the healthiest economy.”
Although the new forecast is predicting economic growth to continue in the nation, California, and the Inland Empire in the short run, albeit at a slower pace (“we’ve cooled from white-hot to red-hot”), in the longer term, the major economic wildcard comes from the growing Federal deficit. According to the new forecast, much will depend on how long bond markets are willing to tolerate the excessive level of today’s U.S. government debt.
In California, the state is on the brink of a milestone: recovering all the jobs it lost during the pandemic-driven downturn and mass retirement. While many states have already reached full recovery, as of this writing, California still has a 47,300 job deficit. However, it’s increasingly likely that the state’s job count will be above water by the end of this year, according to the forecast.
Key Findings:
- In the United States, inflation is moderating and may have peaked, but it won’t decelerate rapidly. Expect price growth and interest rates to remain elevated in the near term.
- Consumer spending now accounts for the highest share of U.S. GDP since 2006. This consumption is also apparent in the rapidly growing U.S. trade deficit, which accounts for the largest a share of GDP since the runup to the Great Recession.
- There is a massive amount of equity in the current U.S. housing market driven by a decade of low mortgage debt accumulation. The industry also has very low inventories of existing homes for sale and vacancy rates are still at a record low level. This is not a market that is due for a collapse—at least not yet.
- The major problem for new housing is the ultra-low mortgage rates homeowners currently enjoy. Anyone who sells now will have to go from a sub-3 rate to something in the 5+ category. That is not a move most homeowners make—unless they have to. The ‘move-up’ market is all but frozen.
- California’s employment recovery has been uneven, with inland communities faring better than coastal areas. The Inland Empire has 5% more jobs today than it had prior to the pandemic, while at the other end of the spectrum, there are still 3% fewer jobs in Ventura County.
- California’s labor force contracted during the pandemic and employers have struggled to find workers, especially in coastal communities. The primary reason behind the labor force changes is population growth. From 2019 to 2022, population grew in inland communities and declined in coastal communities, driven by affordability.
- After two years in which California’s housing market went gangbusters, and home prices increased an average 43%, the rising interest rate environment, in addition to stretched prices, has led to a major slowdown in 2022. A price crash in the market is nowhere in sight, although a slowdown in price growth is expected.
- The share of homes purchased by investors in the Inland Empire is at record highs. This parallels the nationwide interest by private equity in purchasing large swaths of residential real estate. This forecast expects the share of homes purchased by investors in the region to increase.
- Current sale price cuts for homes in the Inland Empire are more of a reality check than a price decline warranting concern. The rate of bidding wars has only dipped to levels seen in the early part of 2020.
- The Inland Empire has experienced a tremendous boom in Transport and Logistics employment (16.6% of all jobs in the region are now in this sector). The Information sector has also grown, but lags other employment categories, highlighting the relative underrepresentation of knowledge workers in the region. This forecast expects employment in the Inland Empire to continue expanding, although at a tapered pace.
The 13th annual Inland Empire Economic Forecast Conference was held on October 5th. A copy of the forecast book can be downloaded in its entirety here.
Economy
No Near-term Recession Says Leading Forecast; Supercharged Consumers will Propel U.S. Economy into 2023

Recession Potential Will Grow If Federal Reserve Tightens To Control Inflation… But The Sooner The Better; California On Verge of Recovering All Jobs Lost To Pandemic
Despite real signs of stress in parts of the system, for now, consumers will carry the U.S. economy through this year and into 2023 without a downturn, according to Beacon Economics‘ latest outlook for the United States and California. The wealth created by the excessive fiscal stimulus enacted in 2020 and 2021 continues to drive a consumer consumption binge and the new forecast anticipates economic growth to look better in the second half of 2022 (when final numbers are available) than it did in the first half.
Inflation will continue to run hot, and interest rates will continue to rise as a result, but those circumstances are not recession causing, according to the outlook. Instead, expect a slow pace of overall economic growth, with weaker numbers from the more rate sensitive sectors.
“Functionally speaking, policymakers went from maximum acceleration – the stimulus – to maximum braking – tightening by the Fed – over a single year, something that would create turbulence in even the healthiest economy,” said Christopher Thornberg, Founding Partner of Beacon Economics and one of the forecast authors. “But in the near-term, while parts of the economy will remain cool due to rising interest rates, that supercharged U.S. consumer, armed with a $30 trillion increase in household wealth over the pandemic period, will keep momentum going.”
The new forecast also argues that inflation may have peaked but will not decelerate rapidly. “Until the Fed gets serious about tightening, that is reducing the money supply and raising interest rates, expect price growth to remain elevated,” said Thornberg.
Although the potential for a real recession in the nation will increase if and when the Fed applies more aggressive quantitative tightening to control inflation and push up real (rather than nominal) interest rates, the faster the Fed acts the better in order to prevent a truly deep negative business cycle, according to the forecast.
Starting in 2023, if Fed action is inadequate the United States may be looking at 3 or more years of very weak growth, with consumers in a relatively poor financial position at the end. If the Fed stamps out inflation in the near-term by aggressively reducing its balance sheet, it will drive up interest rates, cool financial markets sharply, and possibly create a modest recession next year led by consumer cutbacks. However, the nation would come out of it with a strong private sector.
In California, the state is on the brink of a milestone: recovering all the jobs it lost during the pandemic-driven downturn. While many states have already reached full recovery, as of this writing, California still has a 73,000 job deficit. However, if the economy adds the same number of jobs as it did in the latest numbers in the next data release, the state’s job count will be above water.
“California’s labor force contracted during the pandemic and employers have struggled to hire the workers they need, especially in coastal communities,” said Taner Osman, Research Manager at Beacon Economics and one of the forecast authors. “These difficulties circle directly back to the long-term affordability crisis facing the state as the labor forces in more expensive coastal areas have declined while they have grown in relatively affordable inland communities.”
View the new The Beacon Outlook including full forecast tables here.
Economy
It’s The Demand Curve, Stupid…

It’s The Demand Curve, Stupid…
By Christopher Thornberg
The biggest obstacle to slowing inflation is that the real causes of it—excessive consumer demand and rapidly rising wages—are too politically toxic to acknowledge.
The August CPI report showed prices in the United States continuing to increase, contrary to the predictions of most Blue-Chip forecasts and the Federal Reserve. This has spooked the markets and caused a sharp decline in the various indexes—the S&P 500 dropped over 4%. The decline in the markets doesn’t surprise me—they are the ultimate drama queens of the economy, overreacting to everything. They will likely bounce back soon enough.
What does perplex me is how we collectively continue to be surprised when the official inflation forecasts fall well below reality. This same kabuki dance has been repeated almost monthly for more than a year now, with expert economists assuring us that price growth will soon decelerate and maybe even reverse, followed by a gnashing of teeth and predictions of doom when it turns out the data is not living up to the optimism.
I am certainly not suggesting that inflation is easy to forecast—especially on a month-to-month basis. But the problem I see here is different. The major forecasts and official prognostications aren’t just missing the mark, they have consistently predicted lower inflation rates than have been occurring. In statistical parlance the forecasts have bias. And this bias stems from the fact that the cause of inflation has been misinterpreted as primarily a supply chain issue, when in fact it is an excess demand and labor cost issue.
Consider the various explanations for inflation over the last year. They have typically attributed the problem to parts shortages (e.g., empty car dealer lots and high used-car prices), energy markets (the high cost of gasoline), the war in Ukraine and grain markets (food prices) among other issues. The following quote is from a Wall Street Journal reporter discussing her interviews with various economists prior to the summer CPI estimates:
“[June] will probably prove to be the peak for the annual measure of CPI. That’s because pretty much all of the major drivers of the inflation surge this year and last year are fading or outright reversing. Energy prices are on the downswing, most obviously gasoline prices. Upstream, energy and food commodity prices have come down a lot in recent weeks too, which suggests that there’s more easing to feed through to consumers in store, particularly on the grocery front. Supply-chain pressures seem to be gradually improving.”[1]
If we think about inflation as being strictly driven by limitations in inputs, then any relief in those supply pressures should cause prices to fall. But this is not the case today, as the August number clearly demonstrates. The supply-chain theory of inflation is wrong. And the reason many experts continue to get it wrong is because the true causes of today’s inflation—excess consumer demand and rapidly rising labor costs—are politically toxic and difficult to acknowledge in these terse populist times.
Excess consumer demand has been caused by an overstimulation of the economy on the part of the Feds. As I have written many times, the pandemic hit to the economy was never the crisis it was portrayed to be, and the $6.5 trillion in fiscal stimulus, largely funded by $5 trillion in new money created through the Fed’s quantitative easing program, was vastly more than necessary. It set financial markets to new (unsustainable) highs and ultimately generated a 25% bump in household net worth ($30 trillion in new wealth) in just 2 years. This new “wealth” has driven consumer spending to new highs, and that is what is causing inflation. As Milton Friedman famously quipped: “Inflation is caused by too much money chasing after too few goods.”
Looking at the supply side only mistakes the symptoms for the disease. Gasoline prices shot up because the minor issues with supply were magnified by the major jump in demand. Estimates of short-run demand elasticity for gasoline suggest the market is inelastic, but still, an increase in price will lead to a decrease in consumption if those prices are only being driven by supply constraints. Yet, the Bureau of Economic Analysis’ GDP data shows that in the last 18 months, even as energy prices rose 97%, consumption of energy products increased by 7%. Prices rose so dramatically because of the surge in demand, not the limitations on supply.
And now that energy prices are falling as supply catches up, money not spent on energy is simply flowing to other spending—healthcare, housing, restaurants, travel—and causing more inflation in those categories. And those sectors also have supply shortages—driven by labor shortages rather than supply chain issues. Just as excess demand drove up energy prices, excess demand is also causing a rapid increase in worker earnings, which is another important contributor to business costs and output prices. According to the Atlanta Fed’s wage tracker, U.S. worker earnings are now growing at a 6.7% annual pace—the highest rate ever recorded in the 40 years of data they have created.
And therein lies the political problem. If we acknowledge that inflation is being driven by excessive consumer demand, then we must admit that Americans are overconsuming. That’s an idea that doesn’t fit the miserabilist narrative that underpins political debate today. Both parties consistently tell their supporters how terrible they have it and then immediately blame the other party’s policies. Apparently, in the political world, most U.S. households are living hand to mouth, workers are highly underpaid, and we’re all just one paycheck away from financial disaster. To suggest otherwise would be gauche.
For the record, U.S. consumers are overconsuming. Consumer spending as a share of nation’s GDP is the highest it’s ever been, except during the runup to the Great Recession—not a comfortable comparison. This overconsumption is one of the root causes of the growing U.S. trade deficit, currently at almost 5% of GDP, again the widest it’s ever been except for the 2005 and 2006 period. As for the idea that real earnings growth is negative, you only get this result if you use the CPI estimate of inflation, which overstates the situation for technical reasons we won’t dive into here.[2] The appropriate deflator is the PCE deflator from the Bureau of Economic Analysis, and if we use that, real earnings growth is positive, albeit not at a 40-year high pace.
Of course, this story is only explaining the mechanisms within basic monetary theory. If you want to predict how much prices will increase, you only need to look at money supply. The Federal Reserve’s quantitative easing program expanded the money supply of the United States by 40%. Therefore, holding all else constant, prices need to go up by 40% to equilibrate the size of the economy to the size of the money supply.
While the Fed’s quantitative easing caused inflation, oddly their response to the problem has been primarily to push up the Federal Funds rate, the old tool that Ben Bernanke had largely moved past during his tenure. The big hikes in the Federal Funds rate have done very little to reduce the money supply; it has only stopped growing. If the Fed is serious about slowing inflation, they need to engage in quantitative tightening—which they say they will be starting this month.
By tightening of course, they will, by definition, cool consumer demand and weaken labor markets, as these are the ultimate sources of inflation. Given that policymakers are seemingly unwilling to acknowledge that the problem is excessive spending as well as wage growth, it unfortunately suggests they will be unwilling to do what is necessary to slow inflation.
The only question then is how much longer will we continue to be surprised by it.
2 For more about the CPI’s inflation estimate see: https://www.clevelandfed.org/newsroom-and-events/publications/economic-trends/2014-economic-trends/et-20140417-pce-and-cpi-inflation-whats-the-difference.aspx
-
Business12 months ago
Business Activity Continues To Surge In The Inland Empire; Growth Will Moderate Now That Region Has Surpassed Pre-Pandemic Levels
-
Commercial Real Estate Transactions8 months ago
SRS’ Investment Properties Group Brokers $35 Million Sale of Major Portion of One Eleven La Quinta Center, a 154,383-SF Retail Community Center in La Quinta, CA
-
Career & Workplace8 months ago
Worker Shortage Holding Back Full Job Recovery in California’s Major Metros
-
Business12 months ago
Sunitha Reddy, Prime Healthcare VP of Operations, Named to Modern Healthcare’s Top Emerging Leaders List
-
Technology12 months ago
Charter Communications Launches Spectrum Internet 100
-
Government & Regulations11 months ago
San Manuel Elects Lynn Valbuena as Chairwoman
You must be logged in to post a comment Login