Los Angeles Hotel Sales Evaporated This Year, But Olympics, World Cup Await

Los Angeles Hotel Sales Evaporated This Year, But Olympics, World Cup Await

November 30, 2023 | Bianca Barragán, Southern California 

It’s hard out there for Los Angeles-area hoteliers, but many are steadfast in their belief that better times are just around the corner — for those that can hang on. 

Atlas Hospitality Group President Alan Reay told the audience at Bisnow’s Los Angeles Hospitality Summit at the Omni Hotel and Resort Los Angeles that year-to-date, Los Angeles County hotel sales are down nearly 80% compared to the same period in 2022. Just 17 hotels have sold so far this year, in stark contrast to the 79 that traded in the same period last year.

“There’s only ever been one time that we’ve seen such a decline like that, and that was back in 2009,” Reay said. 

That slowdown in transactions is keeping a vicious cycle rolling. 

“The problem with underwriting in LA today is that you don’t have an exit that you can underwrite,” said Adrienne Jubb, Aimbridge Hospitality senior vice president of development and acquisitions.

“It’s hard to get investors excited about LA because of the lack of exits,” Jubb added. 

Panelists touched on “social issues,” such as the growing unhoused population, as another headwind facing Los Angeles. 

“Branding is very important,” The Athens Group Chief Operating Officer Jay Newman said. “The brand of LA is very tarnished right now. People are not talking about LA in a positive way.” 

Oxford Capital Group and Oxford Hotels & Resorts Chief Operating Officer Sar Peruri said there won’t be a lot of new hotel development in the near term, and that might work out well for him and other owners. 

“If there aren’t a lot of projects being built and demand continues, which we hope that it will, over time, I think you can push rates, [and] NOI is going to improve,” Peruri said. 

Reay said that in some cases, Los Angeles is losing hotel supply to purchasers like the city of LA, which recently bought a local hotel to serve as residences for unhoused people. He said that will potentially work in favor of LA owners. 

“Over the long term, if you can get into the Los Angeles market, you’re going to have restrictions on new supply, which really is going to be able to drive up your rates and drive up your profit,” Reay said.  

While this might be good news for owners in the long run, Los Angeles will soon be hosting two major sporting events, the 2026 World Cup and the 2028 Olympics, that will require a solid base of hotel rooms, panelists said. 

If the city wants to see more hotel rooms built for these events or just for the future of tourism in the city, some said the city should work to incentivize developers, especially with hurdles like the high cost of construction and the city’s Measure ULA real estate transfer tax. 

“We’re developing a hotel in Palm Springs with [transient occupancy tax] rebate,” Dream Hotels at Hyatt Head of Development David Kuperberg said. “The only way to make that pencil is that $5M that goes straight to the bottom line. That hotel, without it, it would be hard to develop in Palm Springs.”

Contact Bianca Barragán at bianca.barragan@bisnow.com

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