High interest rates and inflation weigh down hotel sector

By George Avalos | gavalos@bayareanewsgroup.com | Bay Area News Group

UPDATED: August 9, 2024 at 4:24 p.m.

SAN JOSE — Hotel purchases have imploded in California and the Bay Area, a fresh sign that post-coronavirus economic ailments, including high interest rates, still impair the weak lodging sector statewide.

Investors paid an aggregate of $447.5 million for hotels in Northern California during the first six months of 2024, according to a new report from Atlas Hospitality Group, which tracks the lodging market in the state.

Sales volume for hotels in Northern California nosedived 36.9% from the same six-month period in 2023, Atlas Hospitality reported.

Southern California purchase activity totaled $739.4 million over the first six months of 2024, which Atlas Hospitality estimated was down 53.7% from the same half-year period the year before.

California hotel buying volume totaled $1.19 billion during the first half of this year, which was down 48.5% from the prior year’s initial six months.

Three hotel deals were of interest during the first six months of the year in what was a brutal market for hotel investment activity, according to Atlas Hospitality:

— Alameda County: One hotel was purchased, Oakland’s 148‐room La Quinta Inn, at a $12 million price.

— Santa Clara County: One hotel was bought, the 51‐room Comfort Suites San Jose Airport, with a purchase price of $10.25 million.

— In San Francisco, the most expensive hotel deal was the purchase of the 136‐room Da Vinci Hotel San Francisco for $16.5 million.

“The lingering impact of higher interest rates, combined with the rise in operating costs, particularly in labor and insurance, are holding down sales volume and prices,” Atlas Hospitality Group reported.

Originally Published: August 9, 2024 at 12:05 p.m.