Hotel Sales in California Plunge Amidst Investor Exodus

Hotel Sales in California Plunge Amidst Investor Exodus

ByJames Forsyth – Aug 18, 2023

The Bay Area and Southern California are experiencing a significant downturn in hotel sales, as investors quickly exit the market. According to the San Jose Mercury News, the number of hotels sold in California during the first half of the year has plummeted, surpassing the lows seen during the Great Recession. Data from Atlas Hospitality Group reveals a 52.9% drop in hotel sales from January to June compared to the same period last year.

These figures are even worse than the 51% decrease witnessed at the end of the recession in 2009. Alan Reay, President of Atlas Hospitality Group, expressed his concerns, stating that the industry had never experienced such a severe decline.

Both Northern and Southern California have been hit hard, with Southern California experiencing the sharpest decline. Hotel sales in this region fell by 58.9%, with only 62 hotels being sold in the first half of the year compared to 151 in the same period last year. Northern California also saw a significant decline of 44.6%, with only 62 hotels sold compared to 112 in the previous year.

While both regions still witnessed major hotel deals, the number of foreclosures in the market contributed to these numbers. The largest hotel deal in Northern California involved the purchase of the Claremont Hotel & Spa in Berkeley for $163 million. In Southern California, the U.K.-based Reuben brothers purchased the Fairmont Century Plaza in Los Angeles for $1 billion.

Atlas Hospitality warns that more hotel foreclosures are expected, as increasing mortgage rates drive up loan finance costs for potential buyers. They have noticed a rise in notice of default filings and foreclosures, as well as borrowers returning the keys to lenders. The future of the hotel industry in California remains uncertain as the market struggles to recover.

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