By The Registry Staff

The Atlas Hospitality Group’s Year-End 2023 California Sales Survey revealed a substantial downturn in hotel sales across the state, characterized by a 45 percent decline in individual sales — a figure only eclipsed by the recession year of 2009. Sales volume decreased by over 56 percent, marking the second steepest decline in 15 years.

Despite these challenges, the median price per room experienced a modest decline of just over one percent, maintaining its position as the second-highest on record.

“2023 is the year we saw the second steepest decline in hotel sales in California over the last 15 years. The rapid increase in interest rates has created a huge disconnect between buyer and seller expectations and we have a huge number of buyers now sitting on the side lines waiting for distressed hotel sales,” said Atlas Hospitality Group President Alan Reay.

Southern California Highlights

Los Angeles County faced a 55 percent decrease in transactions, with a total dollar volume decline of over 35 percent. Despite this, the average sales price per room saw a 5 percent increase, albeit with a 17.6 percent drop in median price per room. The sale of the 400-room Fairmont Hotel at Century City for a total of $720 million, or $1.8 million per room, stands as the highest-priced transaction statewide.

Orange County faced a significant 61 percent decrease in transactions and an 83 percent decline in total dollar volume. Despite these stark figures, median prices per room rose by almost 24 percent. The sale of the 251-room DoubleTree Anaheim Resort for a total of $62million, or approximately $247,000 per room, was the largest transaction and the highest priced hotel in the county.

Riverside County recorded a 27 percent decrease in transactions, with San Bernardino County experiencing an unprecedented 83 percent drop. Despite these challenges, both counties saw increases in average and median prices per room, indicating localized market variations.

San Diego County witnessed a 23.5 percent decrease in transactions and a drop in total dollar volume of just over 42 percent. However, average and median prices per room experienced notable increases, showcasing resilience amidst challenging circumstances. The 225-room Four Points San Diego located on Aero Drive was the largest hotel sold, fetching a price of $13 million, or just under $58,000 per room. Meanwhile, the 85-room Inn at Rancho Santa Fe claimed the title of the highest-priced transaction, commanding a total of $100 million, or just below $1.2 million per room.

Northern California Highlights

San Francisco County reported a 23 percent drop in transactions and a decline in total dollar volume of nearly 71 percent. Despite this, the sale of the Hotel Zoe for $68.5 million, or approximately $310,000 per room, showcased pockets of activity amidst overall market contraction.

In Alameda County, there was a 67 percent decline in individual transactions, while the total dollar volume saw a contrasting increase of 22 percent. The largest and highest-priced hotel sold in the county was the 276-room Claremont Hotel Club & Spa in Berkeley, fetching a total of just over $163 million, or approximately $592,000 per room.

Meanwhile, in Santa Clara County, hotel transactions witnessed a 47 percent decrease in 2023, while the total dollar volume mirrored this decline by falling 70 percent. Average price per room saw a decline of 19 percent, accompanied by a 26 percent decrease in median price per room. The largest and highest-priced transaction in the county was the sale of the 264-room Signia San Jose South Tower, which traded hands for a total of just over $73 million, or approximately $277,000 per room.

Sacramento County saw individual transactions fall by 44 percent, with the total dollar volume following suit with a 69 percent decrease. The average price per room decreased by 9 percent, while the median price per room dropped by 11 percent. The largest hotel sold in the county was the 152-room Sure Stay Plus Cal Expo in Sacramento, while the highest-priced hotel sale was the 90-room Residence Inn in Rancho Cordova that sold for approximately $20 million, or around $218,000 per room.

The Atlas survey concludes that the annual decline in sales volume is attributed to a fundamental disconnect between buyer and seller price expectations, exacerbated by rapid increases in interest rates. For the market to regain momentum, sellers may need to adjust prices relative to financing costs, or alternatively, a reduction in interest rates could stimulate demand. Moreover, the survey reveals that rising operational costs, particularly in labor and insurance, are squeezing profit margins, further dampening market sentiment. Addressing these cost pressures might alleviate further downward pressure on future sales.