Hotel purchases across California plunged last year, a sign that investors believe the weakness in the lodging sector has yet to run its course.
Measured by dollar amount, statewide hotel purchase activity plummeted 56% in 2023 – tumbling by 60% in Southern California and 48% in Northern California, Atlas Hospitality reported. in California. This represents the second-worst decline ever documented by Atlas Hospitality Group, which tracks the lodging industry in the state.
The decline in sales activity is a result of hotel buyers staying on the sidelines at a time of economic uncertainty and murky prospects for the lodging sector, according to Alan Reay, president of Irvine-based Atlas Hospitality Group.
“Most investors are in a wait-and-watch situation,” Reay said.
The ugly numbers for 2023 …
California: hotel purchases totaled a combined $3.76 billion, compared with nearly $8.6 billion in 2022, according to the Atlas Hospitality survey.
Southern California: $2.31 billion, down from $5.8 billion in 2022.
Northern California: $1.45 billion, down from the 2022 total of nearly $2.8 billion.
Some hotels tumbled into foreclosure during 2023, while in other cases, hotel property owners simply walked away from making loan payments and gave the keys to their lenders.
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In the wake of the coronavirus outbreak in early 2020, state and local government agencies imposed wide-ranging business shutdowns to combat the spread of the deadly virus.
The lockdowns, in turn, throttled economic activity in countless ways — curbing air travel and chasing away tourists, business people and local patrons from staying in hotels.
Even after the lockdowns ended, the lodging sector has battled to recover from the shutdowns.
Reay believes the hotel market could become worse before it gets better.
“If interest rates come back down, then we will see sales activity pick up and values will stabilize or move up,” Reay said. “If interest rates do not decline, we may start to see more distressed sales. That will create downward pressure on values.”
Priciest 2023 sales by Southern California county …
Los Angeles: 400-room Fairmont Hotel at Century City at $720 million.
Orange: The 251-room DoubleTree Anaheim Resort at $62 million.
Riverside: 136-room Motel 6 in Temecula at $21 million.
San Bernardino: $16 million paid for the 120-room Motel 6 in Ontario.
San Diego: 225-room Four Points San Diego at $13 million.
Jonathan Lansner of the Southern California News Group added to this report.
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