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IRVINE, CA-California is on track to post its lowest number of hotel sales in at least 15 years, according to a mid-year look at hotel sales in the state that shows that the number of transactions fell 51% and the sales dollar volume plunged 80% in the first six months of 2009 in comparison with the first half of 2008. “California is on track to have the lowest number of sales since we started tracking over 15 years ago,” says Alan Reay, president of Atlas Hospitality Group, which issued the report.

Reay tells GlobeSt.com that California hotel owners are now facing a “perfect storm” of circumstances that, in addition to the sluggish sales, include a record high in the number of hotels on the market, plummeting revenues, little to no new financing and a surge in troubled assets. “It makes for a very bleak outlook,” the Atlas president says.

The ratio of hotels on market to hotels sold is a record of more than 19 to one, meaning that more than 19 hotels are on the market for every one sold. Even if no more hotels become available for sale, which Reay calls “highly unlikely,” the number of properties already on the market would constitute a 10-year supply at the current sales pace. He tells GlobeSt.com that he expects sales to continue at a sluggish pace for the rest of this year, but eventually the pace of deals will accelerate as lenders place more foreclosed properties in the market at substantially lower prices in order to clear them from their books.

The number of sales in the first half of this year totaled 49, versus 100 in the first half of last year, which in turn was down from the previous year. The dollar volume for the first six months of this year dropped to $247.5 million versus more than $1.2 billion in last year’s first half.

The pace of sales now has slowed dramatically from the peak years, when the number of transactions surpassed 300 per year. A more typical pace is about 200 to 250 sales per year, which was the case before the numbers zoomed in the peak years before the boom ended.

Although the survey is focused solely on California, Reay says that Atlas believes that many of the forces here are at work throughout the country. The sales report follows an earlier study by Atlas showing that the number of hotels in default in California was rising dramatically. Updated numbers in the new study show 250 troubled assets either in default or lender-owned in the state, including the luxury St. Regis Monarch Bay Resort in Dana Point. The 250 troubled hotels represent a ratio of five troubled properties for each one sold in the first half of this year.

What this means for the hotel industry, among other things, is that, in order to move the backlog of deals, “There will have to be a complete re‐pricing throughout the entire market,” Atlas says. Equity is being erased at a record pace, and when the surge of lender deals eventually hits the market, prices are going to fall even further, the Irvine-based firm forecasts.

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