Encinitas bluff-top luxury hotel moves forward after 30 years of delays

Developers finally started construction activity in early January on a Leucadia bluff-top hotel project that’s been talked about for decades.

Located just west of La Costa Avenue’s intersection with Coast Highway 101 and part of a site that once contained the Cabo Grill, the 4.3-acre property will become home to a $110 million, 130-room hotel. The luxury hotel, which will have ocean views from all but two of its guest rooms, is scheduled to open for business in November 2020.

It’s been a long time coming. So long that initial plans for the project actually date back to the 1980s, a time before some of today’s adults were born, Fenway Capital Advisors Managing Partner Larry Jackel joked Thursday, Jan. 10.

Fenway Capital purchased the property about 13 months ago and is working jointly with JMI Realty to develop the land, which was once owned by KSL Resorts, Jackel said. Long ago, this property was envisioned as a companion property -- kind of a “beach club” -- to the La Costa Resort & Spa just east of El Camino Real, he added.

After some two decades of working its way through the state and local permitting process, the hotel project received its necessary development permits in 2008 and was headed toward construction when the nation’s economy took a nose-dive, he said. Now, working off those previous coastal development permit approvals, the project is being re-started by a new group of developers.

People passing the site initially will notice little more than new fencing, construction trailers and some surveying work. But at the end of January, a hotel project-funded sand replenishment will start on the beach below the bluff. Contractors will be adding 45,000 cubic yards of sand to the beach between late January and the end of February.

A public staircase in the area will remain and a new beach access pathway will be added from La Costa Avenue as part of the hotel development, Jackel said. The new pathway is scheduled to open just before the start of summer in 2020, a construction timeline indicates.

The hotel project also will be paying for an overhaul of Coast Highway’s intersection with La Costa Avenue, and the new hotel access point will be directly from that intersection, Jackel said.

City officials have long lamented Encinitas’ lack of hotel offerings, particularly upscale properties, saying that many out-of-town folks use the city’s beaches but spend their nights in other North County towns, particularly Carlsbad.

In the current fiscal year, which ends June 30, Encinitas is forecasting that it will collect a total of $1.7 million from its transient occupancy tax, which is commonly referred to as the hotel “bed” tax. For comparison, Carlsbad is forecasting that it will collect $25.4 million in bed taxes during the same period.

When the new hotel opens, Encinitas’ bed tax revenue is forecasted to double; the project’s developers say the new hotel may produce $1.5 million to $2 million in annual bed tax revenue for the city.

This will be Fenway Capital Advisors’ first hotel project, but its partner in this project -- JMI Realty -- has many hotel properties, including several in San Diego County. Two that would be comparable to the future Encinitas hotel are The Inn at Rancho Santa Fe and Hotel Solamar in downtown San Diego, JMI Realty CEO John Kratzer said.

“Those two hotels and this hotel are what we call lifestyle boutique hotels,” he said.

They have upscale amenities, such as spa services, but they also reflect elements of the areas in which they’re located, he said. For example, the Encinitas project is being described as a “barefoot luxury” facility in marketing literature. It will be a place that “people will be proud of ... but very comfortable walking around in their flipflops, which is something I think reflects Encinitas,” Kratzer said.

Room rates haven’t been set yet, but comparable properties are running about $400 night, he said.

One other thing that also hasn’t been decided is the future hotel’s official name. For now, they’re just calling it “Encinitas Beach Hotel” on marketing materials, the two men said.

Encinitas Beach Hotel

• 4.3-acre site, west end of La Costa Avenue
• 130 rooms, with 16 suites
• 4,105-square-foot main restaurant & lounge
• 1,410-square-foot terrace restaurant
• 1,925-square-foot, outdoor bar
• 1,000 square-foot “bike cafe” to serve cyclists cruising the Coast Highway 101 corridor
• 1,000-square-foot spa with 5 treatment rooms
• 11,060 square feet of meeting room space

-- Barbara Henry is a freelance reporter for The San Diego Union-Tribune.