Atlas in the news

Hotel sales plummet in California with deal value falling 53%

In NorCal, volume totals $1.45B as investors take “wait-and-watch” stance to hospitality FEB 7, 2024, 11:36 AM | By TRD Staff The hotel market in California has tumbled down the laundry chute. The overall money spent to buy hotels across the Golden State fell 56.3 percent last year, as investors waited along the sidelines of the lodging sector, the San Jose Mercury News reported, citing figures from consultancy Atlas Hospitality Group. Measured by dollars, California hotel deals totaled a combined $3.76 billion last year, compared with $8.6 billion in 2022.  In Northern California, acquisitions of hotels last year plunged by 48.3 percent, and by 60.2 percent in Southern California. The decline in sales is because hotel buyers stayed out of the market at a time of economic uncertainty and murky prospects for the lodging sector, according to Alan Reay, president of Irvine-based Atlas Hospitality. “Most investors are in a wait-and-watch situation,” Reay told the Mercury News. Last year, Northern California hotel purchases totaled $1.45 billion, down from $2.8 billion in 2022. The biggest deals included $163 million paid for the 276-room Claremont Hotel Club & Spa in the Oakland and Berkeley market; $73.1 million paid for the 264-room Signia by Hilton…

News briefs: Deals tumble in Cali; meet Ella Hotels; Danziger retires

BY JEFFREY WEINSTEIN | FEBRUARY 6, 2024 Breaking news about development, M&A, data and more. Deals tumble in California. California Hotel Sales Survey for end of year 2023 showed that statewide, hotel deals plunged 56.3% (48.3% in Northern California; 60.2% in Southern California), Atlas Hospitality Group reported. Northern California deals hotel totaled $1.45 billion, down from the 2022 total of nearly $2.8 billion. Southern California purchases had a value of $2.31 billion in 2023, down from $5.8 billion in 2022. California hotel purchases totaled a combined $3.76 billion, compared with nearly $8.6 billion in 2022, according to the Atlas Hospitality survey. Meet Ella Hotels. London-based alternative investment firm H.I.G. Capital has combined their hotel assets to create Ella Hotels & Resorts, a luxury, lifestyle and hotel group operating a collection of sustainable “eco-chic” resorts across Southern Europe. Following a phased development and refurbishment plan, Ella’s portfolio will be comprised of 13 hotels wit 4,500 rooms in five of Greece’s key tourist destinations. The group projects that Ella’s current portfolio will command a value in excess of €1 billion. Ella plans to expand further into additional, established Mediterranean holiday destinations, focusing on opportunities in Spain, Portugal, and Italy, with a target of reaching 10,000 total rooms in…

Hotel deals implode in Bay Area and California as economy turns murky

Dollar value of hotel purchases nose dives in 2023: new report By GEORGE AVALOS | gavalos@bayareanewsgroup.com | Bay Area News Group PUBLISHED: February 6, 2024 at 8:00 a.m. | UPDATED: February 7, 2024 at 4:32 a.m. SAN JOSE — Hotel purchases have nose dived in the Bay Area and across California, in a sign that investors believe the weakness in the lodging sector has yet to run its course. Measured by dollar amount, acquisitions of hotels plunged by 48.3% in Northern California and by 60.2% in Southern California, Atlas Hospitality reported. The Northern California market includes the Bay Area. Statewide, hotel purchase activity plummeted 56.3% in 2023 in California. This represents the second-worst decline ever documented by Atlas Hospitality Group, which tracks the lodging industry in the state. These were the highest-priced hotel deals in the Bay Area in 2023, according to the Atlas Hospitality Survey:— Claremont Hotel Club & Spa in the Oakland-Berkeley area. The 276-room hotel resort was bought for $163 million.— Signia by Hilton South Tower in downtown San Jose. The 264-room southern tower was bought for $73.1 million. It’s being converted into housing for San Jose State University students.— Hotel Zoe in San Francisco. The 221-room hotel was bought for $68.5 million. The…

Cost of Capital Drives 45% Drop in California Hotel Deals

Decline in 2023 Is Second Only to 2009 By Bryan WrotenHotel News Now February 6, 2024 | 6:04 AM California’s individual hotel sales dropped 45% year over year in 2023, surprising no one. What did come as a bit of a surprise for Alan Reay, president of Atlas Hospitality Group — which produced its annual year-end California Hotel Sales Survey — is that the decline wasn’t deeper given that sales were down 53% halfway through the year. It was during the second quarter of 2022 that interest rate increases kicked in, so Reay expected to see a bigger drop when comparing the remainder of the two years, he said. The survey reports individual sales dropped from 483 in 2022 to 265 in 2023. Total dollar volume fell 56.3% to $3.75 billion. The year-end drop in dollar volume was the second largest in 15 years, with 2009 experiencing a 75% decrease. The median price per room dipped 1.08% to $150,000, but it was still the second-highest median price per room that Atlas has recorded. Performance Does Not Equal Value Hotels are performing much better now than they were during the pandemic and early parts of the recovery, Reay said. That’s not enough,…

Spotlight: California

Affordable housing is in short supply in the Golden State. By Neil Pierson California is attractive for many reasons. The weather is warm but milder than many other states. The natural beauty is highlighted by nine national parks, more than any other state. And jobs in the Golden State tend to pay well as the average annual salary of $73,220 trails only Massachusetts and New York. But California also has a number of challenges, and housing is arguably the most pressing. About 1.3 million renter households in the state, or 22%, are classified as extremely low income, according to the National Low Income Housing Coalition. And the state has a shortage of nearly 1 million homes that are affordable and available for these people, defined as those who earn less than 50% of the area median income. A report this past December in The Wall Street Journal delved into the regulatory maze that has stalled many affordable housing projects in California and made them more expensive to complete. In San Jose, the cost to build a single unit of low-income housing in 2022 was $983,700, up 24% from the previous year. San Francisco granted less than half as many housing…

Tom York on Business:

by Tom York Orange County’s Atlas Hospitality Group. reports that during 2023 two hotels with a total of 267 rooms opened in San Diego County. The largest was the 145-room AC Hotel San Diego. The hospitality real estate broker reported there are currently six hotels with 2,191 rooms under construction in the county. The largest is the 1600-room Gaylord Bayfront Resort in Chula Vista. It’s also the largest in the state. Statewide, there are 107 hotels under construction totaling 14,225 rooms. * * * Tom York is a Carlsbad-based independent journalist who specializes in writing about business and the economy. If you have news tips you’d like to share, send them to tom.york@gmail.com.

LA law creates new hurdles for hotel developers

Compromise requires builders to replace homes demolished by development By TRD Staff | JAN 22, 2024, 11:36 AM Hotel developers in Los Angeles must now replace homes demolished for hospitality suites. The City Council passed a law early last month requiring new hotel projects to replace displaced housing units on a one-for-one basis, Hotel News Now reported via CoStar News. The Responsible Hotels Ordinance favors affordable housing over new hotel developments. The legislation was a compromise between the council and Unite Here Local 11, a labor union advocating for affordable housing. As part of the compromise, the council rescinded a March 2024 ballot initiative supported by Unite Here that would have required hotels to make vacant rooms available to homeless residents. Instead, the new ordinance establishes a voluntary registry for hotels to notify the city about vacant rooms available for use as interim housing. Having to replace housing units is a deterrent for hotel developers, whose interest in building in Los Angeles had already ebbed. Alan Reay, president of consulting firm Atlas Hospitality Group, said it adds another obstacle, making it more challenging for developers to consider new projects in L.A. “When we’re talking about the city of Los Angeles,…

California sees hotel supply shortage, could push up values

No new hotels opened in SF in 2023 JAN 19, 2024, 12:30 PM | By Daria Solovieva Last year wasn’t a walk in the park for California developers and the latest numbers show it. A biannual survey by brokerage firm Atlas Hospitality Group published this week indicated the hotel supply issues are likely to persevere through 2024. Last year, only 53 new hotels opened in California, totaling about 6,200 rooms, representing a 10 percent decline from 2022. That number marks the lowest number of rooms open since 2016, according to the firm’s data. “Not only do we have a very limited supply of new units coming online, and that’s because of customer money, financing, cost of construction have gone way up, and the lenders that were in the hotel construction business have pulled back from it, Atlas Hospitality’s Alan Reay said. “That will restrict development going forward.”  “But what we have seen in the last two years has never, ever happened before in California, and that is we actually have a shrinking supply.” He noted that what makes California’s hotel market dynamics unique is that in addition to a record low number of new hotels opening up, a lot of…

Los Angeles Housing Law Adds More Hurdles to Hotel Development

High Barriers To Entry Make Construction Harder To Justify Financially By Bryan Wroten | Hotel News Now | January 19, 2024 | 6:28 AM A new law in Los Angeles could have a dramatic effect on hotel development in the city — that is, if hotel developers didn’t already feel constrained by the overall environment there. In early December, Los Angeles City Council passed its Responsible Hotels Ordinance to require new hotel development projects to replace any displaced housing units on a one-for-one basis. The ordinance is aimed at prioritizing affordable housing over new hotel developments in the city. The ordinance was a compromise between the city council and Unite Here Local 11, a labor union that represents hospitality workers and that has been advocating for more affordable housing in the city. In passing the new ordinance, the council officially rescinded a March 2024 ballot initiative backed by Unite Here that would have required hotels to make vacant rooms available to the unhoused. The new ordinance also directs the city to create a voluntary registry for hotels to notify the city about vacant rooms available as interim housing. The prospect of having to replace housing that is demolished or converted for…

Hotel development implodes in Bay Area and California due to economy: new report

Lousy market torpedoes hotel projects and openings statewide By GEORGE AVALOS | gavalos@bayareanewsgroup.com | Bay Area News Group PUBLISHED: January 17, 2024 at 1:50 p.m. | UPDATED: January 18, 2024 at 6:17 a.m. SAN JOSE — Hotel construction and new openings have cratered in the Bay Area and throughout California, fresh evidence of a brutal commercial real estate market statewide, a new report shows. The post-coronavirus pandemic struggles for the lodging sector appear to have eroded the hotel market in a big way, according to a yearly survey released by Irvine-based Atlas Hospitality Group. “The rapid increase in interest rates, together with lenders pulling away from making hotel construction loans is definitely having a negative impact on hotel development in California,” Atlas Hospitality stated in its report. An estimated 17 hotels with a combined total of 1,987 rooms were constructed in 2023 in the Bay Area, the Atlas Hospitality report determined. Those numbers represent a sharp decline from Bay Area totals for 2022, when 25 hotels with a combined total of 2,709 rooms were built, according to Atlas Hospitality, which tracks the California lodging market. In 2023, the number of hotels built in the Bay Area plunged 32% from 2022, while the number of constructed rooms fell…

California Hotel Room Openings Drop 10% in 2023

Slower Pace of Hotel Supply Growth Could Be a Years long Phenomenon in the State By Bryan Wroten | Hotel News Now | January 17, 2024 | 5:20 AM The number of hotel rooms opened in California in 2023 dropped 10% compared to 2022, and that’s likely a sign of what’s to come with hotel development in the state. Atlas Hospitality Group’s California Hotel Development Survey 2023 Year-End reports that 53 hotels with 6,280 rooms opened in California last year. That’s down from the 57 hotels with 6,993 rooms that opened in 2022. Since Atlas started tracking California hotel development in 2010, the average number of hotels opened each year is 46, Atlas President Alan Reay said. The low point was nine hotels in 2011, and the peak was in 2019 with 92 hotels. Given the current development and lending conditions, it’s likely this is the start of a slowing in pace for hotel openings in the state. “For 2024, I think that we will start to see the beginning of the slowdown of new hotels opening up in California,” he said. The drop from 2022 to 2023 was not a surprise, Reay said. The difficulties owners and developers face in…

New Rules Passed For LA Hotels As Industry Worries About Development Pause

December 10, 2023 | Bianca Barragán Existing hotels like the Biltmore Hotel in Downtown might be benefactors of a climate that is less attractive for new hotel development. The Los Angeles City Council last week finalized a deal that removes a measure from the March 2024 ballot that would have required hotels across the city to offer vacant rooms to unhoused Angelenos and replaces it with a series of new regulations to the approval process for new hotels.  Hotel trade groups embraced the new regulations as a favorable alternative to what had been proposed. But others in the industry expressed concern over the implications of these new regulations, in addition to preexisting macroeconomic conditions, on new hotel development.  A release from the Hotel Association of Los Angeles called the removal of the original measure and the concurrent approval of the replacement regulations a victory for Los Angeles and its hospitality community. The initial measure would have thrust hotel employees onto the front lines of a citywide crisis in asking hotels to provide shelter to unhoused populations, the organization said. “This solution ensures that our hotel community is thriving and able to continue providing excellent careers and economic benefits to our iconic neighborhoods throughout Los Angeles,” Hotel Association of…

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