The North Bay saw few hotel sales and development projects through the first half 2024. Only one new hotel opened, the 99-room Wyndham Garden Inn Redwood Valley in Mendocino County.

CHERYL SARFATY | THE NORTH BAY BUSINESS JOURNAL August 19, 2024, 10:30AM

Hotel sales and development plans in California as of June 30 continued to reveal a downward trend, according to a real estate firm that tracks the state’s hotel industry.

In the North Bay, the decline since the end of 2023 was most evident among hotel sales, with three of the six counties — Marin, Lake and Solano — reporting no hotel sales at all, according to Atlas Hospitality Group, a Newport Beach-based real estate brokerage that specializes in hotel properties across California.

“The prices that the sellers are looking for are not in sync with buyers’ expectations, and (that is) why buyers have opted to purchase hotels in other markets,” Alan X. Reay, president and founder of Atlas, told the Business Journal. Atlas recently released its midyear hotel surveys, one for sales, the other for development plans. It also produces year-end surveys.

The State of Hotel Sales

As of June, 13 hotels had sold in the North Bay. The most expensive transaction was the 73-room Best Western Petaluma Inn in Sonoma County, which sold for just shy of $12 million. That was followed by $8.9 million for the 63-room Comfort Inn & Suites Ukiah in Mendocino County. In Napa County, the most expensive purchase was the 17-room Hideaway Cottages Calistoga, which sold for just over $5 million, according to Atlas.

Statewide, hotel sales volume continued to drop through the first six months of this year, down 48.5%. Alameda County in the East Bay had the sharpest decline at 93%, followed by Los Angeles County, down 78.9%, according to Atlas.

In the planning stages

On the hotel development side, the outlook for California remains bleak for shovels to hit the ground anytime soon.

“Given the Fed has yet to lower interest rates this year (but say they’re getting closer to doing so next month) … lenders are taking a wait-and-see position and are very reluctant to finance new hotel construction projects,” Reay said.

Further, there has been an increase in hotel projects being halted after having started construction, according to the report.

In the North Bay, 95 hotels were in the planning stage at midyear throughout the six-county region. Nine hotels were under construction: six in Sonoma County, two in Napa County and one in Marin County.

Now open and what’s to come

As of June 30, one hotel opened in the North Bay: Wyndham Garden Inn Redwood Valley a 99-room hotel in Mendocino County, according to Atlas.

Statewide, 22 hotels opened in the first half of the year, a 10% increase from a year prior, but with 15% fewer rooms. That means there is a trend of smaller hotels being constructed, Reay explained.

Looking ahead to 2025, Reay said, “We still see hotel development to be restricted for at least the next two years. On hotel sales, we are predicting a pick up in the second half as investors look at lower interest rates and sellers become more realistic on their pricing expectations.”

95 local hotel projects on the drawing board

Napa County (35 projects): 22 in Napa; seven in St. Helena; two in American Canyon; two in Calistoga; one in Pope Valley; one in Yountville

Sonoma County (30): nine in Santa Rosa; six in Healdsburg; three in Petaluma; three in Rohnert Park; three in Sonoma; one in Geyserville; one in Guerneville; one in Kenwood; one in Sea Ranch; one in Sebastopol; one in Windsor

Solano County (11): four in Vacaville; three in Fairfield; two in Vallejo; one in Dixon; one on Mare Island

Lake County (eight): four in Lakeport; three in Clearlake; one in Middletown

Marin County (eight): three in Novato; three in San Rafael; one in Corte Madera; one in Mill Valley

Mendocino County (three): two in Fort Bragg; one in Ukiah

Source: Atlas Hospitality Group, California Hotel Development Survey 2024 midyear