It seems that 2017 was the year in which people started to invest in hotels across Southern California. This makes sense because it is a hugely popular tourist destination and visitors are happy to pay quite significant prices. So much so, in fact, that there are now some concerns about affordability for the average middle class Californian.
As the weather warms up, families across California are planning summertime visits to the beach. But overnight trips to the state’s famous coastline are becoming increasingly difficult for middle-class residents to enjoy because the price of admission is soaring.
Investments Continue to Pour In
However, while those concerns were raised and some people were worried about the inaccessibility of the California coast to the average person, investments still continued to come in, resulting into luxury hotels and properties. In fact, according to Atlas Hospitality, some 180 hotels were sold across this part of the state last year alone.
Atlas Hospitality reports 180 Southern California hotels were sold in 2017 — seven more deals that 2016 and including 17,051 rooms — up 8 percent in a year. And buyers paid up, spending $3.8 billion to acquire Southern California hotels last year, a 22 percent jump above 2016’s deals. The median hotel value, per room, rose 8 percent.
They have also reported that 39 new hotels opened in 2017, and that 2018 will see 75 new hotels opening. It is believed that this ‘binge’ in purchases is due to investors becoming less interested in other forms of commercial real estate, as well as an increase in investors from the Asia/Pacific region. According to Atlas Hospitality, 32 of the hotels sold in California 2017 were classed as ‘Trophy Hotels’, which means they costed at least $50 million. This was the highest for all of the states in the country.
Unsurprisingly, this was an effect seen across all of Southern California. In Orange County, there was a one to 23 rise, although the median price per room price for sold hotels did drop by 5%. The most expensive deal was seen in Newport Beach, where the Duke Hotel, a 440 room luxury hotel was sold for $125 million.
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Meanwhile, there was an eight to 29 rise in sales in San Diego County, and a 9% increase in median selling prices. San Diego County’s most expensive deal was Carlsbad’s Park Hyatt Aviare, the 329-room hotel that sold for $187 million.
Observers also noted developments in Riverside County, where some 31 hotels were sold in 2017, nine more than the year before. However, there was a 7% decrease in value per room. The most expensive deal here was Palm Desert’s JW Marriott Desert Springs Resort, and 884 room property that was sold for $160 million.
Decline in Los Angeles County and San Bernardino County
Two exceptions to the rule seemed to be in Los Angeles County and San Bernardino County. In the first, there was an eight to 50 decrease in sales. However, the value per room reached a record high with a 12% jump. West Hollywood’s The Jeremy, a 286 room hotel, sold for $280 million, making it the priciest deal in all of Southern California.
San Bernardino County, as mentioned, was also down, one sale to 26. However, they saw the highest increase in median prices per room, with a 37% increase. Their most expensive sale was San Bernardino’s Hilton Garden Inn. The 115 room property sold for $21.5 million.