The hospitality industry continues to show strong signs of life as sales of California lodging properties during the first half of 2015 were revealed to have surpassed all previous records.
According to The San Diego Union-Tribune, hotel sales in California reached over $4.4 billion in the past six months, overtaking all previous midyear totals for the state since Orange County-based Atlas Hospitality Group began tracking sales activity in 1994. In fact, this year's midyear total is even above the volumes recorded for all full years of sales, excluding 2006.
Atlas Hospitality president Alan Reay told The San Diego Union-Tribune that the industry can't maintain the pace that has been seen over the past 12 to 18 months. 2015 began with a bang, with the state's Montage Laguna Beach and Westin Market Street each selling for over $300 million. However, sales in San Diego County were actually down for the first half of this year compared to 2014, but the difference was made up by the average selling price for hotels in the County increasing more than 43 percent to $191,663. Over 13 transactions have taken place in the past six months in excess of $100 million.
“That’s driven, one, by historic low interest rates and two, huge buyer demand, and three, sellers who believe the prices they’re able to obtain are great prices, so that’s why they’re selling,” Reay said. “In San Francisco, for example, up until 2007, no hotel there had sold for more than $500,000 a room, except for one. And from 2007 through 2014, there was no sale above $500,000 per room, but in the first six months of this year, we had five hotels out of eight sell for over $500,000 a room."
Statewide, San Francisco also saw the single largest sale, the 1,024-room Parc 55, which sold for $530 million.
According to The Orange County Register, investors are paying for bigger hotels, too. The median sale for an Orange County property was $32 million, more than triple the average price paid in 2014. Median room count for hotels sold in the past six months was 145, vs. 61 in 2014.
This is indicative of an industry in full swing, as STR reported last week with the announcement that the U.S. hotel industry had surpassed 5 million rooms for the first time. And building isn't done in California, though the focus is shifting. More lower-end hotels are being called on for development in San Diego, and the demand is already there.