Does Santa Barbara Have a Hotel Problem?

A quick online search for hotels in Santa Barbara yields more than 100 results, and this fiscal year, the Transient Occupancy Tax collected from these hotels is expected to reach $30.8 million — 9 percent higher than expected. In 2022, Visit Santa Barbara reported that the average price of a hotel room jumped by more than 40 percent since 2019.

Simply put, the hotel business is booming.

But at the same time, the city is struggling to meet the housing needs of its residents, and aside from a few developers willing to offer a small portion of their units as affordable housing, the city is seeing a wave of hotels proposed by developers looking to make a quicker return on their investments. In the downtown area especially, from Mission Street all the way to the Funk Zone, hotel developers are jumping at the chance to cash in on the tourism industry.

The High-Tech Hotel Guru

One of the developers jumping in with both feet is Bay Area–based Arvand Sabetian, who built his fortune when he sold his first company, Arvixe — which he founded when he was just a junior in high school — for $22 million in 2014. A few years later, he was featured in Inc.com’s “30 Under 30” list, and now, he is overseeing at least six boutique hotel projects with a total of 155 rooms in the downtown Santa Barbara area.

Sabetian’s first company specialized in remote work, even before the pandemic made working from home the cultural norm. Arvixe focused primarily on customer service, and Sabetian kept the same idea with his new company, Ziprent, a remote property management service that allows landlords to outsource the day-to-day management of tenants and properties. According to the Ziprent website, the company has managed more than 2,600 units in more than 320 cities, processing at least $180 million worth of rent since 2019.

Using the same model, Sabetian entered the boutique hotel market here in Santa Barbara, testing out a self-check-in system — with no lobby, no concierge, and no room service — starting with the six-unit Casa Valerio and 13-unit Casa Jardin. 

The two smaller-scale hotels worked like a charm (a one-bed unit at Casa Jardin, priced as high as $700 per night, is fully booked through the first week of September), but when Sabetian put in a proposal for a 30-unit self-check-in hotel at 812 Garden Street, it caught the attention of neighbors who worried that the unmanaged hotel would cause noise and security issues for the tenants at the Laguna Cottages for Seniors across the street. With no overnight staff, they felt that the hotel could be rife with parties and crime.

In an interview with the Independent, Sabetian said he didn’t quite understand why people were so upset over the prospect of a self-check-in process. “Every hotel that I know of has a self-check-in,” he said. “Are we going to go back in time or not?”

The hotel at 812 Garden, he said, would be just as safe as the Casa Jardin and Casa Valerio properties, and would only add to the value and character of the neighborhood. Before he purchased the 12,000-square-foot building, it was an empty office building that he said welcomed more squatters and transients than would ever be at his hotels. None of his current properties, he added, has had any security issues due to the self-check-in system.

Despite the pushback, the project won the approval of the Historic Landmarks Commission (HLC), as did a 15-unit hotel at 513 De la Vina Street submitted by Sabetian and AB Design Studio in 2020, which, after several revisions, received full approval last year. 

Going Even Bigger

With both projects now moving forward, Sabetian and AB Design Studio are turning their attention toward two more ambitious projects within just a few blocks of each other: a 73-room hotel proposed at a former three-building medical office property at 1919 State Street and a 37-room hotel proposed at the historic First Christian Church at 1915 Chapala Street. 

On July 19, both projects came across the HLC for the latest rounds of comments and project design approval.

The church property, which is listed on the city’s Historic Resources Inventory, was constructed in 1924 and was upgraded in 1957 to its current Mediterranean style. The iconic pink church was purchased in June for $5.3 million, according to a Barton Real Estate group listing. Neighbors received a city notice that Sabetian was planning on converting the church, remodeling the interior, and cutting out a section of the roof to create a central courtyard. The church’s 171-space parking lot, according to the plans, will be reduced to 41 spaces — the minimum required by the city’s zoning codes.

The State Street 73-room hotel project proposal also includes adding a fourth floor and roof deck. Commissioners voted 8-1 in favor of it, saying that the proposed design stayed faithful to the original property and kept modifications to a minimum. But Commissioner Ed Lenvik, the lone “no” vote, questioned “a lot of aspects,” including the rooftop deck, which has become a popular feature among new hotel projects in the city. (The former Forever 21 building on State Street, also proposed as a hotel conversion, includes plans for a rooftop deck.)

“I personally don’t buy into all of that roof being used for outside use,” Lenvik said. “I won’t accept that for Santa Barbara. I’m really disappointed in all the roofs we see now being used.”

While the two biggest projects gained HLC approval, both still have to win over the planning commission and the city council, where there could be greater resistance due to the pressure for the city to push for much-needed housing.

But according to Sabetian, the modifications needed to provide long-term housing would have been “too severe” to pursue, and a conversion to a hotel was much easier and could be done with minor alterations. 

Losing the Funk?

Sabetian’s six boutique hotels have cruised through the review process in part due to the fact that they all have been done with minimal alterations, and will match the Spanish Colonial style of El Pueblo Viejo District. 

But another project is taking a less subtle approach. Longtime land owner Bill Wright plans a 250-room behemoth on the corner of Garden and Yanonali streets in the Funk Zone just a block away from another 155-unit multi-use development. The city and Wright negotiated a Specific Plan that allowed the hotel in 1983.

The project calls for merging six lots, tearing down every structure, and building a 178,919-square-foot hotel with 130 extended-stay and 120 “self-service” rooms, along with an 85,000-plus-square-foot underground parking garage — in an area likely to see a drastic sea-level rise in the coming decades.

A grassroots group called Keep the Funk opposes the Funk Zone developments, updating posts regularly on its Instagram page (@keepthefunksb) which has more than 1,000 followers. “The Funk Zone is not — in any way, shape, or form — the neighborhood that it used to be in 1983,” the group wrote in one post. “And it certainly does not need yet another hotel.”

The planning commission hearing regarding the Garden Street Hotel is scheduled for Thursday, August 3, at 1 p.m.