'Completely Obliterated': LA County Hotel Sales Drop 53% In Early 2023
Hotel sales in Los Angeles County declined nearly 53% in the first half of 2023 compared to the same time last year, according to a report this week from Atlas Hospitality Group.
Only 17 hotels in LA County traded hands in the first half of this year, down from 36 sales last year. The county’s largest transaction was the $760M foreclosure sale of the Fairmont Century Plaza Hotel, although the full price tag included the hotel, retail space and some of the condos in the Century City property.
Interest rates are hammering transaction volumes, and buyers and sellers are far apart on offers, Atlas Hospitality Group President Alan Reay said. Even when both parties can agree on a price, often those properties aren’t getting appraised and financed.
Only one hotel transaction over $5M closed in the city of Los Angeles in the second quarter, which was also the first quarter the city’s new tax on transactions over $5M was in effect. Normally, there would be anywhere from 15 to 20 in the second quarter of the year, Reay said.
“We have, on the national scale, what’s happened with interest rates,” Reay said. “You can then apply what the city of Los Angeles has done as of April 1, and that has completely obliterated the market in terms of selling.”
Other parts of the state without new taxes aren't faring much better in terms of hotel transactions, Reay said.
Hotel sales are down 53% statewide compared to the first half of 2022 — the largest decline by percentage of sales in two decades, according to Atlas Hospitality Group. Even in the first half of 2009, following the Global Financial Crisis, sales were only down 51% year-over-year, the report says.
Eight hotels were foreclosed on across the state in the first half of the year, including the Fairmont Century Plaza in Century City.
Reay pointed to the news of Park Hotels & Resorts handing back the keys to two San Francisco hotels it owned rather than continuing to make payments on a $725M securitized loan tied to the hotels. Those hotels were valued at $1.6B when the loan was issued, Reay said.
“You're looking at a situation here where [ownership] does not believe that those hotels are worth 50% of what they appraised for,” Reay said.
Reay said that barring intervention at the federal level, he expects to see more foreclosures as the year goes on. In LA County alone, he said he is tracking five or six properties that can be considered in default but where no notice of default has been officially filed.
