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Friday, Jan 27, 2023

County’s Hotels Retain Room Value Despite Declining Sales

San Diego’s hotel buying frenzy that peaked in late 2005 and ran full steam the following year is apparently over.

According to a survey by an Irvine-based brokerage, the Atlas Hospitality Group, the county saw 19 individual hotel sales last year, a 42 percent decline from 33 in 2006, while the dollar volume plummeted from $805 million to $171 million, a 79 percent drop.

Nonetheless, the median price per room , the yardstick by which the industry measures hotel values , was basically flat, comparing $99,358 last year to $98,718 the year before.

In 2007, the San Diego properties that sold had a combined 1,725 rooms versus 4,275 rooms in 2006.

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“The income from hotels hasn’t dropped,” said Alan Reay, the author of the report, who heads Atlas Hospitality. “The reason the market has dropped is purely a function of what’s going on in the financial market.

“So if you don’t have to sell, the cash flow is good. The people who are getting hurt are the hotel operators who are trying to flip (properties).”

Reay says that the last time his company brokered a hotel transaction in San Diego was in September, when the fallout in the subprime lending market was beginning to be felt throughout the financial market nationwide.

“It was tough to get financing,” he said. “Things changed almost overnight.”

The largest of the county’s hotels that sold last year was the 394-room Hilton La Jolla Torrey Pines. But since it was part of a $2.4 billion portfolio of 51 properties across the country, its individual price was not broken out. The highest reported price was $42 million paid for the Hampton Inn San Diego, a 177-room property downtown.

For the state as a whole, the sales volume totaled $3.5 billion last year, off 32 percent from a record-breaking $5.1 billion in 2006. The number of individual transactions totaled 343, down from 390.

In the northern half of the state, 172 hotels went for a combined $1.4 billion, a 28 percent decline from 2006, while Southern California logged 171 sales totaling $2 billion, a 24 percent decline.

The bright spot, Reay says, was that the median per-room price was up 18 percent to $91,507 statewide.


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