California hotel sales plummeted last year, according to Atlas Hospitality Group, which recently released its 2023 end-of-year hotel sales survey.
“The big jump-out is the dramatic or steep decline in number of transactions and dollar volume,” said Alan Reay, president of Atlas Hospitality Group, who’s been tracking California hotel sales for more than 20 years. “This is the steepest decline we’ve seen in the last 20-plus years, except for one year, and that was 2009.”
Last year, individual hotel sales were down 45% over 2022 statewide, illustrating the second largest percentage decline in the last 15 years. Sales volume declined by 56%, the second steepest decline in sales volume in the last 15 years as well.
For Reay, the biggest culprit behind these staggering numbers was the increase in interest rates.
“What we have now is a disconnect between what buyers are willing to pay and what sellers want to sell for,” he said. “And that’s because sellers are used to what prices were in 2022 when interest rates were 50% below what they are today.”
And within Los Angeles specifically, Measure ULA – the one-time real estate transfer tax unique to L.A. city properties valued at or above $5 million that went into effect on April 1 – coupled with union strikes and increased costs of labor have only made matters worse.
“It’s really turned a lot of investors away from the market,” Reay said.
While the Southern California markets of San Diego, Orange County and Riverside all experienced increases in the median price per hotel room, Los Angeles County’s median price per room declined 18%.
Yet despite ULA, the state’s highest-priced hotel sale of the past year was the $720 million paid at foreclosure by the lender for the 400-room Fairmont Century Plaza in Century City. And L.A. County, with $1.2 billion in sales, accounted for 32% of the entire California hotel sales market.
A rebound is ahead
But the worst of it might be over, according…
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