It’s the steepest decline in more than a decade.

By LORI WEISBERG | The San Diego Union-Tribune UPDATED: August 12, 2024 at 12:57 p.m.

The number of hotel sales in San Diego County has hit another low mark, falling 54 percent during the first half of this year compared with a year earlier, which is the steepest decline in more than a decade.

Not only were individual transactions down markedly, but the dollar volume was as well, falling 51 percent from $200.4 million a year ago to $97.5 million during the first six months of 2024, according to a newly released report from Orange County-based Atlas Hospitality Group. That is the fifth steepest decline since 2009, Atlas said.

Market trends in San Diego mirror what’s going on across the state. Statewide, the dollar volume of hotel sales was down 48.5 percent, although individual transactions only dipped 1.6 percent, Atlas reported. The brokerage firm, which tracks hotel sales and development in California, said the total dollar value of sales activity statewide was the fourth lowest since it’s been tracking real estate transactions in the lodging industry.

What’s noticeable from the latest report, says Atlas President Alan Reay, is the absence of larger, high-profile properties changing hands. Instead, there’s more of a focus on small hotels, especially those run by smaller companies or by a single owner-operator.

“Even though individual transactions were down slightly statewide, when there’s a big dollar volume decline, it tells you there weren’t many trophy sales in California and secondly, there’s more activity in the smaller hotel market, although there’s a little less of that in San Diego. But in Los Angeles and other places that were hit hard with strikes and labor negotiations, a lot of buyers are wary of getting involved in bigger hotel transactions.”

Statewide, the average size of all hotels sold during the first half of the year was 59 rooms, Reay said.

In San Diego County, the single biggest sale among the six transactions was the 149-room SpringHill Suites in Oceanside, which commanded a price of $44 million. However, the property with the largest sales price per room was also the smallest —the Sand Castle Inn & Suites.

While there were no especially large hotels among the San Diego transactions for the the first half of this year, just last month the 394-room Hilton La Jolla Torrey Pines resort sold for $165 million.

Looking ahead, Reay expects hotel transactions to pick up as buyers tire of waiting for for deeply discounted properties that are not materializing.

“There were a lot of companies that raised money, anticipating foreclosures that didn’t happen,” Reay said. “These people are now sitting on a lot of money and now deciding they need to get into the market and buy. And sellers are getting more realistic.

“San Diego, though, is still one of the most desirable markets in California from the buyer’s standpoint, and that’s why we’re not seeing many hotels reducing their prices. But you are seeing big reductions in San Francisco, Oakland and downtown Los Angeles. San Diego is a very strong, resilient market. so owners there are not as motivated as owners who are hurting in other markets.”

Originally Published: August 12, 2024 at 10:17 a.m.