The purchase price translates to $511,000 per room for the 184-room hotel that enjoyed a 90 percent occupancy rate and average daily rates of $245, according to hotelnewsresource.com.
Jodi Weinhofer, president of the Lodging Association of the Florida Keys and Key West, attributed the hotel sales activity to Key West's high occupancy rates and some of the highest hotel rates in the nation.
"Right now, the stock market hasn't been performing very well, so investors such as these from a real estate investment trust (REIT) are putting their money into hotels and real estate, and Key West is a great investment," Weinhofer said. "We've become a victim of our own success in that regard."
In announcing the sale, DiamondRock officials called Key West "one of the most robust and consistent hotel markets in the United States," and explained, "Development of additional hotel rooms on the island is prohibited by a Rate of Growth Ordinance that limits occupancy growth on the island, whether residential or transient. The combination of strong demand and capped supply has allowed Key West to become the highest ... market in the country. As a testament to Key West's stability, the market has also outperformed the United States average in each of the last two downturns."
In the case of the Sheraton Suites, which officially changed hands on June 30, Weinhofer added that the hotel's ownership has changed, but not its management company, "so there shouldn't be too much of an impact on employees and guests."
Officials from DiamondRock Hospitality, which also owns The Inn at Key West on North Roosevelt Boulevard, said in a prepared statement that they will "relaunch the hotel as an independent lifestyle resort, leveraging the hotel's high quality, superior room size, and beachfront location."
"We are very excited about our acquisition of this all-suites hotel, which represents our second acquisition in the highest RevPAR (revenue per available room) market in the United States," said DiamondRock president and CEO Mark W. Brugger. "With 480-square-foot guest rooms, the hotel features some of the largest rooms in the market. The hotel is in excellent condition and features direct access to Smathers Beach, the largest and most popular beach in Key West."
The new owners plan to spend $5 million improving the hotel's lobby, pool and guest rooms during renovations that will be done in the offseason without requiring the hotel to close.
"The conversion to an independent hotel is expected to take place in late 2016 after initial upgrades are completed," states a news release, which added that Ocean Properties will continue to manage the property. Ocean Properties already operates six hotels in Key West, including the Westin Key West Resort and Marina and Bayside Inn and Suites on North Roosevelt Boulevard.