LA Hotels Sales Spike in 2021, Bookings Still Recovering

https://labusinessjournal.com/real-estate/large-number-of-l-a-hotels-sold-in-2021/

Hotel sales spiked in 2021 even as room bookings failed to hit pre-pandemic levels. In L.A. County, hotel transactions increased 26.2% from 61 to 77. Total dollar volume, meanwhile, rose a staggering 145.5% to $1.9 billion, the highest of any county in California, according to data from Atlas Hospitality Group.

“The one word that sums up the 2021 survey is ‘record,’” said Alan Reay, president of Irvine-based Atlas Hospitality. “It’s nothing short of phenomenal coming off of the Covid years. This really showed a couple of things: One was a tremendous amount of capital raised in anticipation of hotel closures, and that didn’t happen. Then, you had a lot of transactions close with Project Homekey, the government program to purchase hotels, and those sellers were in the market for exchanges, and then you had portfolio sales.”

Buck Harris, a senior director at Cushman & Wakefield Inc., added that, “Hotel markets were starting to thrive before delta and omicron hit.” Once the Covid strains hit, however, Harris said there were some concerns, but overall hotel sales were still strong last year.

“There was definitely more activity, more volume in ’21 … There was actually more sales volume in Southern California in ’21 than there was in ’19. Despite the pandemic, investors are very, very active. There’s a lot more out there that want to buy hotels,” said James Stockdale, an executive vice president at Jones Lang LaSalle Inc.
He added that some investors now are groups that formed recently to invest in hotels.

Experts agree that some types of hotels are more desirable now than others.
“The biggies are still high quality, recently built select-
service properties. They require very little capital and have a very efficient business model,” Stockdale said.

Harris agreed, adding that extended-stay and limited-service hotels were doing well because “they are not very labor-intensive.”
Harris said luxury, leisure hotels and hotels in drive-to destinations are also doing well as more people look to get away. Locally, that means coastal properties are seeing a lot of demand.

Braemar Hotels & Resorts Inc.
Braemar Hotels & Resorts Inc. purchased the 138-room Mr. C Beverly Hills Hotel and five adjacent condominium units in Pico-Robertson. The hotel fetched $65.4 million, and the condos sold for $12.5 million. The deal closed in August.

“Leisure markets are having some of their best years ever in terms of profitability,” Reay said.

On the other end of the spectrum are hotels dependent on conventions and business travel.

“Those hotels aren’t generating the revenues they typically did pre-pandemic,” Harris said.

Most of the top sales last year, Reay added, were on the Westside. The largest by sales price was the Luxe Rodeo Drive in Beverly Hills. The property at 360 N. Rodeo Drive, which also has retail tenants, sold for $200 million. The hotel had previously shuttered
Nearby, a leasehold interest in the 305-room W Hollywood hotel sold for more than $190 million. And in Beverly Grove, the 295-room Sofitel Hotel sold for $96 million.

One big sale outside of the Westside area was the Courtyard Pasadena, a 314-room property at 180 N. Fair Oaks Ave., which sold for $103.5 million.

Luxe Rodeo Drive BH hotel
The priciest hotel sale in L.A. last year was the 88-room Luxe Rodeo Drive in Beverly Hills, which sold for $200 million in December. The hotel had previously shuttered. The property, at 360 N. Rodeo Drive, also has retail tenants, including Rolex and Ferrari.

JW Marriott Santa Monica Le Merigot hotel
Westwood-based Stockdale Capital Partners purchased the 175-room JW Marriott Santa Monica Le Merigot hotel from Columbia Sussex Corp. for $75 million last May. The property, at 1740 Ocean Ave., is one of only four beachfront hotels in Santa Monica.

What to expect

Experts are predicting a strong 2022, with Harris saying it “is supposed to be similar to 2021 if not better and continues to be led by strong leisure demand.”
Stockdale agreed that 2022 would be a strong year.

“I would not be surprised if in 2022 on the West Coast we see more volume than we did in 2021,” he said.
Reay expects to see a strong first six months of the year because there are currently more buyers than sellers in the market. This dynamic, he said, will continue to result in hefty price tags.

The second half of the year, however, could be a different story. Reay said rising interest rates and concerns about the situation in Ukraine and how it will affect travel and inflation could slow down sales.
“As interest rates go up, we forecast that the market will slow down in the second half of 2022 as buyers and sellers adjust their pricing,” Reay said.

 

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