August 20, 2024 | By The Registry Staff

The recently published Atlas Hospitality Group’s 2024 Mid-Year Sales Report shows California’s hotel market is facing significant challenges this year, driven by higher interest rates and a disconnect between buyer and seller price expectations. These factors have created substantial downward pressure on hotel sales volumes across the state. As a result, California’s hotel sales volume has dropped by 48.5 percent compared to the same period in 2023, with individual sales also experiencing a decline of 1.6 percent. 

This marks the fourth-lowest sales volume since tracking began, underscoring the severity of the current market conditions. The median price per room in California has fallen to $149,262, representing a 7.2 percent decrease from the previous year.

“We have seen a dramatic decline in the total dollar volume of California hotel sales during the first six months of 2024, down 48.4 percent,” said Atlas Hospitality Group President Alan Reay. “This is the result of fewer larger hotel sale transactions, which is due in large part to the discrepancy between buyer and seller price expectations and the difficulty in obtaining financing. On the other hand, we are still seeing smaller hotels trading, where buyer and seller price expectations are more in line and financing is still available from regional lenders and SBA. This is why the total number of sales is almost flat on last year.” 

Southern California Highlights

In Southern California, Los Angeles County saw a 6 percent decline in individual hotel sales and a 79 percent reduction in dollar volume during the first half of 2024. However, the median price per room rose by close to 21 percent, with the most notable transaction being the $68 million sale of the 176-room Residence Inn Manhattan Beach. San Diego County faced even steeper declines, with individual sales down by 54 percent and dollar volume by 51 percent, while the median price per room remained flat. The most expensive sale in the county was the 149-room SpringHill Suites in Oceanside that sold for $43.8 million.

Orange County experienced a 50 percent drop in individual hotel sales, but the dollar volume increased by 4.7 percent. Despite this, the median price per room fell by 4.2 percent. The most expensive sale in both Orange County and California was the 130-room Pacific Edge Hotel in Laguna Beach, which fetched $80 million. 

Riverside County saw individual sales decrease by 9 percent, with total dollar volume plunging over 43 percent and the median price per room declining by over 41 percent. The 107-room Days Inn in Palm Springs was the most expensive sale at $10.05 million.

San Bernardino County was a rare bright spot in the report with individual sales surging by one thousand percent and dollar volume increasing by over 2,000 percent. However, the median price per room dropped by 40 percent. The 117-room Country Inn & Suites in Ontario was the most expensive sale at $18.25 million.

Northern California Highlights

In Northern California, the market also faced significant headwinds. San Francisco County’s individual sales remained flat, but dollar volume fell by 51 percent with the median price per room down by 50 percent. The 136-room Da Vinci Hotel was the most expensive sale at $16.516 million. Alameda County experienced a sharp 50 percent decline in individual sales and a 93 percent drop in dollar volume, with the 148-room La Quinta Inn in Oakland selling for $12 million. Santa Clara County saw individual sales decrease by 50 percent and dollar volume by 65 percent, although the median price per room increased by 11.4 percent. 

On the other hand, Sacramento County witnessed a 300 percent increase in individual sales and a 455 percent jump in dollar volume, despite a 25.6 percent decrease in the median price per room. The 127-room Arden Star Hotel was the most expensive sale at $27.5 million.

Overall, the Atlas Hospitality Group’s report shows California’s hotel market continues to struggle with sales volumes falling in the first half of 2024, following a 33.4 percent decline during the same period in 2023. The average price per room has dropped by 18.6 percent and the median price per room is down just over seven percent. The ongoing impact of higher interest rates coupled with rising operating costs, particularly in labor and insurance, is dampening both sales volume and prices across the state.