LA Hotel Sales Take Substantial Tumble

The steep drop in sales and dollar volume in Los Angeles County mirrors a statewide plunge in sales of hotel properties, President Alan X. Reay of Atlas, a hotel industry consulting and brokerage firm, tells GlobeSt.com.

"We're probably on target to fall under $1 billion in volume and less than 220 sales, and we haven't seen numbers that low since 1990," Reay tells GlobeSt.com. He said room revenue was down 8% to 9% in Southern California and 25 to 28% in Northern California in the past year to 18 months, the fastest drop he's ever seen in hotel room revenue in such a short time.

The decline in dollar volume of hotel sales was almost evenly distributed throughout Northern and Southern California, with a decline of 32% and 40.6% respectively. The number of individual hotel sales fell by 25% in Northern California and by 15.7% in Southern California.

Reay cites a gap between buyers' and sellers' expectations as one reason for the slowing sales. "The revenue numbers have dropped so precipitously that hotel owners have yet to come to grips with them when they sell," Reay says. He cited the decline in revenue at the Sheraton Gateway, a Los Angeles International Airport hotel that is up for sale. Annual net operating income there has plunged there from $7 million in 2000 to $4 million today, he said.

Despite the drops in sales and dollar volume, Reay says prices per room have remained relatively stable. The Barnaby's Hotel in Manhattan Beach was the most expensive in Los Angeles County in terms of price per room this year, $109,756, while the 770-room Furama Hotel at Los Angeles International Airport was the largest hotel to sell in California thus far this year.