Sonoma County hotel sale tops California list for 2023, but plans for new Wine Country rooms remain sluggish

Sonoma County hotel sale tops California list for 2023, but plans for new Wine Country rooms remain sluggish


Where in California do you think the most expensive hotel sale took place last year?

If you said Sonoma County, you would be correct.

In September, the Farmhouse Inn, a 25-room luxury property in Forestville, sold for $32 million, commanding $1,280,000 per room, according to Atlas Hospitality Group, a Newport Beach-based real estate brokerage firm that specializes in hotel properties across California.

Foley Entertainment Group in September purchased a majority stake in the Farmhouse Inn from siblings Joe and Catherine Bartolomei. The duo retained 25% ownership of the six-acre property they purchased in 2001, The Press Democrat reported at the time.

Atlas recently released its 2023 year-end hotel surveys for the state, one summarizing hotel sales, the other reviewing hotel development plans. The group also releases midyear surveys.

Most of the hotel development plans will never see the light of day, said Alan X. Reay, president and founder of Atlas.

“Lenders are currently burdened with loans that are maturing and borrowers are unable to pay off, which has them currently shut down on new construction loans,” he said.

Markets where new hotels have a remote chance of coming to fruition are in high-demand areas like the North Bay’s Wine Country and resort destinations such as Palm Springs, Reay said.

“We would have to see a big reduction in interest rates,” Reay said, “and I do not know anyone who is predicting that scenario.” The Fed has alluded to three possible, yet modest, interest-rate reductions this year, according to multiple reports.

The vast majority of hotels being built in California are limited-service hotels like a Hampton Inn, Courtyard by Marriott or Residence Inn, Reay said.

But there is another issue that could impede the construction of new hotels.

“If we start to see more distress deals hitting the market at lower prices, buyers will be focused on purchasing existing hotels below replacement cost, again lowering the incentive to build new,” he said.

Last year, 53 new hotels opened in California, totaling 6,280 rooms — a 10% decline from the number of rooms opened a year earlier, according to Atlas.

In the North Bay, by the end of 2023, there were 103 hotels in the planning stages and five under construction, according to the report.

Since Atlas’s midyear report in August, one regional hotel has moved from being in the planning stage to construction, and that’s the 22-room Evergreen Boutique Motel in Corte Madera, in Marin County.

In all of Northern California last year, 25 new hotels opened for a total of 2,985 rooms. Of that number, four were in the North Bay: The AC Hotel San Rafael (140 rooms) in Marin County, Home2 Suites Petaluma (140 rooms) in Sonoma County, and two properties in Solano County. They are the Hyatt House Vacaville (136 rooms) and Residence Inn Fairfield (104 rooms).

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