California and hotels haven’t paired this well together since the Eagles’ brought them together for a smash hit in 1976.
Investors spent a total of $9.9 billion on hotels in California in 2021 — four times the total dollar amount spent in 2020, according to a recent report from hotel brokerage Atlas Hospitality Group.
Last year, 510 hotels traded hands. The previous record was set in 2014, when about 400 hotels sold, according to the report. Just under 300 hotels sold in 2020, when the pandemic first impacted travel.
“We’ve never seen anything like this,” Atlas Hospitality Group’s Alan Reay said.
Buyers took advantage of historically low interest rates last year and raised capital anticipating a wave of foreclosures, Reay added. Though, those foreclosures never happened and that “private equity is now being put to use.”
And more and more investors are flocking to high-end hotels in California, as the luxury travel market has bounced back faster than business and conference travel.
A few of these high-end sales were the $200 million sale of the Luxe Hotel Beverly Hills, the $221.5 million sale of the Le Meridien San Francisco and the 777-key La Quinta Resort & Club in Riverside County, which sold for $255 million.
The number of hotel deals increased in 2021 across almost all sizable markets in the state — except for San Francisco, where the rental and office markets have also struggled to recover from the effects of the pandemic.
Only six hotels sold in San Francisco last year, compared to nine in 2020 – although the trend toward the high end was evident even as the number of deals lagged. The median price of the hotels that changed hands in San Francisco was $84.8 million, compared to $15.7 million the year prior.
Los Angeles County saw the most transactions in 2021, with 77 hotels selling last year — a 26 percent increase from 2020. Investors spent about $1.9 billion on hotels, more than double how much they spent in 2020.
The 740-key Westin at LAX was the largest hotel in L.A. County to sell last year. Dallas-based private equity firm Lone Star Funds bought the property from Host Hotels & Resorts in November for $71 million as part of a larger portfolio acquisition.