Hotel sales and development plans in California continued to trend downward as of June 30, according to a real estate firm that tracks the state’s hotel industry.
In the North Bay, the decline in hotel sales since the end of 2023 has been most pronounced, with three of the six counties – Marin, Lake and Solano – reporting no hotel sales at all, according to Atlas Hospitality Group, a Newport Beach-based real estate brokerage specializing in hotel properties across California.
“The prices being asked by sellers are not what buyers are expecting, and as a result, buyers have chosen to purchase hotels in other markets,” Alan X. Reay, president and founder of Atlas, told the Business Journal. Atlas has recently published its half-yearly surveys, one for sales and the other for development plans. Year-end surveys are also being prepared.
The status of hotel sales
As of June, 13 hotels have been sold in North Bay. The most expensive transaction was the 73-room Best Western Petaluma Inn in Sonoma County, which sold for just under $12 million. Next came the 63-room Comfort Inn & Suites Ukiah in Mendocino County for $8.9 million. In Napa County, the most expensive purchase was the 17-room Hideaway Cottages Calistoga, which sold for just over $5 million, according to Atlas.
Nationwide, hotel revenue continued to decline in the first six months of this year, falling 48.5 percent. The biggest decline was in Alameda County in the East Bay, at 93 percent, followed by Los Angeles County, which dropped 78.9 percent, according to Atlas.
In the planning phase
As far as hotel development is concerned, the outlook for California remains bleak and hotel construction is unlikely to begin any time soon.
“Given that the Fed has not cut rates yet this year (but expects to do so in the next month), lenders are taking a wait-and-see approach and are very cautious about financing new hotel construction projects,” Reay said.
In addition, the report says there has been an increase in cases where hotel projects have been stopped after construction has begun.
In the North Bay, 95 hotels were in the planning stages across the six-county region at mid-year. Nine hotels were under construction: six in Sonoma County, two in Napa County and one in Marin County.
Now open and what’s coming
On June 30, a hotel opened in the North Bay: the Wyndham Garden Inn Redwood Valley, a 99-room hotel in Mendocino County, according to Atlas.
Across the state, 22 hotels opened in the first half of the year, up 10% from the previous year, but with 15% fewer rooms. That means there is a trend toward building smaller hotels, Reay explained.
Looking ahead to 2025, Reay said, “We expect hotel development to be constrained for at least the next two years. We forecast a rebound in hotel sales in the second half of the year as investors look to lower interest rates and sellers become more realistic with their pricing.”
