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Hotel Transaction Volume Plummets After Record 2017

The Daily Transcript
08/10/18

Hotel Transaction Volume Plummets After Record 2017
By Thor Biberman

The 169-room La Quinta Inn & Suites at 641 Camino del Rio South in Mission Valley sold for $19.5 million at the beginning of 2018 The buyer was Kamla Hotels of Cerritos.

Hotel transaction volume in San Diego County decreased by more than 41 percent and the total dollar sales volume plummeted by nearly 77 percent during the first half of 2018, according to an Atlas Hospitality Group report.

The transaction dollar sales volume of hotel and motel sales declined from $372.1 million in the first half of 2017 to just $86.21 million through June this year. In past years, there often were single hotel sales that exceeded the $86 million.

The total number of hotel rooms involved in first-half sales amounted to just 801, marking a decrease of 46.3 percent from the same period last year.

The median hotel sales price declined by 30.9 percent year-over-year to $3.11 million.

With much lower-priced transactions, the median price per room in San Diego County declined about 58 percent from $117,188 through June of 2017 to just $49,017 through the first half of this year.

Atlas Hospitality president Alan Reay doesn’t think all of these figures are a major cause for concern.

“I think we’re experiencing more of a normal sales activity,” he said. “2017 saw a huge volume of transactions.

“We caution against making a direct comparison to 2007-2009, due to 2017 being a record-breaking year for California hotel sales. Despite the large decline in individual sales, values are still going up. The median price per room rose over 11 percent.”

Reay said last year saw about 420 transactions statewide, and that about 300 hotel sales are typical in any given year.

He said two factors are at work. One is there are fewer hotels for sale, and “if people were thinking of selling, they did it last year.”

Two hotels tied for the largest sale price in San Diego County in the first half of 2018 with both selling for $19.5 million.

One of these sales was the 169-room La Quinta Inn & Suites at 641 Camino del Rio South in Mission Valley at the beginning of 2018 The buyer was Kamla Hotels of Cerritos.

The other was the 86-room West Inn & Suites at 4970 Avenida Encinas in Carlsbad, which was purchased by San Diego-based Pacifica Cos.

Opened in May 2006, the West Inn & Suites is an upscale boutique hotel featuring 36 suites, a fitness center, heated outdoor pool and whirlpool, state-of-the-art boardroom, library and breakfast area, according to The CoStar Group.

Hotel and motels aren’t always the highest and best uses for given sites. This appears to be true in the case of 929 West Grape, a 29-room former motel property that was purchased for $12.11 million on June 25 by the Japanese development firm Lia Sangyo Co. Ltd.

The Tokyo-based residential development company said they intend to develop a luxury multifamily asset of approximately 70 units on the site.

The La Jolla-based Monarch Group paid $11.5 million for a Days Inn at 225 Bay Boulevard in Chula Vista in June.

“The Days Inn was sold ‘as-is,’ ” according to CoStar. “No credits to the buyer for deferred maintenance. The buyer, Monarch Group, was persistent in their acquisition. It sent multiple offers to buy until the sellers accepted.”

California experienced a 35-percent drop in the number of hotels sold through the first six months of 2018, according to Atlas Hospitality. There were 134 individual sales, marking the third lowest total in the last 10 years.

The state’s total dollar volume declined 28 percent, while the median price per room went up more than 11 percent.

Only two major California submarkets saw an increase in the number of sales: Sacramento and San Francisco counties.

Sonoma County showed the largest decline, with no hotel sales through the first half of the year.

Reay said that as long as revenue per available room remains strong, California’s hotel market will continue to be healthy.

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