Bay Area hotel sales have tumbled into a slump

By GEORGE AVALOS | gavalos@bayareanewsgroup.com | Bay Area News Group

PUBLISHED: October 3, 2023 at 9:25 a.m. | UPDATED: October 4, 2023 at 6:59 a.m.

SAN JOSE — A hotel along a light rail line in San Jose has landed local buyers, a reminder that some hotel sales are happening even in the face of a feeble Bay Area lodging market.

Caravelle Inn & Suites, a hotel at 1310 North First Street, was purchased for $3.8 million, according to documents filed on Sept. 2 with the Santa Clara County Recorder’s Office.

The 50-room, two-story hotel is near the interchange of Interstate 880 and North First Street.

The San Jose-based ownership group, which operates as District Eleven LLC, bought the property through an all-cash deal, the county records show.

This transaction marks one of the few hotel purchases in the Bay Area so far in 2023 — and one of the very few in Santa Clara County.

During the first six months of 2023, only eight hotels were bought in the Bay Area, including two in Santa Clara County, according to a survey by Atlas Hospitality Group, which tracks the lodging market in California.Of the two hotels that were bought in Santa Clara County, one was the Arena Hotel, which was purchased for $22.9 million, Atlas Hospitality reported. The purchase was part of a process to convert the building into a lodging for homeless people.

The other hotel deal in Santa Clara County during the first half of this year was the purchase of the Comfort Inn and Suites at 1510 North First Street in San Jose, which was bought in a $6 million deal, according to Atlas Hospitality.

The number of hotels sold in California during the first half of 2023 plunged by 52.9% compared with the first six months of 2022, Atlas Hospitality Group reported.

In 2009, at the tail-end of the last recession, hotel sales in California tumbled a similar 51%.

Both Northern and Southern California have suffered huge declines in the number of hotels sold recently, Atlas Hospitality reported.

Northern California endured a 44.6% plunge in individual hotel sales — specifically, 62 hotels were sold in the region in the first half of 2023 compared with 112 over the first half of 2022.

Southern California suffered a 58.9% nosedive in the number of hotels sold. An estimated 62 hotels were sold in that region over the first six months of 2023 compared with 151 in the first half of 2022.

“We have seen nothing like this, nothing this bad,” Alan Reay, president of Atlas Hospitality, said in an interview with this news organization in August in connection with the report’s release, referring to the plunge in hotel sales activity.