Hotel Sales in California Plunge Nearly 50%

Hotel sales across the Golden State have turned to lead.

In the first half of the year, hotel sales in California sank 48.5 percent to $1.19 billion year over year, the San Jose Mercury News reported, citing figures from Atlas Hospitality Group.

In Northern California, investors plunked down $447.5 million for hotels, 36.9 percent less than they paid a year ago. In Southern California, they paid a combined $739.4 million, 53.7 percent less.

“The lingering impact of higher interest rates, combined with the rise in operating costs, particularly in labor and insurance, are holding down sales volume and prices,” Atlas Hospitality Group, based in Newport Beach, reported.

Hotel Sales in California Plunge Nearly 50% — Atlas Hospitality Group’s Alan Reay (Atlas Hospitality Group)

An equally dour report in February said California hotel deals totaled a combined $3.76 billion last year, compared with $8.6 billion in 2022, as investors sat on the sidelines.

There were three major hotel deals in the Bay Area between January and June, according to the brokerage firm, which tracks the lodging market across the state.

In Alameda County, an unidentified investor bought the 148-room La Quinta Inn in Oakland for $12 million, or $81,081 per key.

In Santa Clara County, an unidentified investor bought the 51‐room Comfort Suites San Jose Airport in San Jose for $10.25 million, or $200,980 per key.

And in San Francisco, an unidentified investor bought the 136‐room Da Vinci Hotel San Francisco in Russian Hill for $16.5 million, or $121,324 per key.

At the same time, two of the city’s largest hotels are up for sale after loan defaults — and have had no takers.

Last month, a judge gave the receiver and a lender for the 1,921-room Hilton San Francisco Union Square and the 1,024-room Parc 55 hotels eight more months to find a buyer.

In October, a court-appointed receiver took control of both hotels after Virginia-based Park Hotels & Resorts defaulted on a $725 million loan tied to the properties.

Kroll Bond Rating Agency put the combined value of both hotels last month at $553.8 million, 65 percent less than their appraised value in 2016 of $1.56 billion. Industry analysts don’t see San Francisco’s hospitality market recovering before 2030.

— Dana Bartholomew