Fewer North Bay hotel rooms sell in H1 2022

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Sales of hotel properties in California continue to be strong in the first half of the year, although they have slowed compared to the first half of 2021, with most of the activity in the North Bay centered in the Sonoma County, according to a company that tracks hotel sales.

The biggest deal in the report was the 58-room Dawn Ranch Lodge in Guerneville. It sold for $20.3 million, or the equivalent of $350,000 per room, according to Atlas Hospitality Group, a Newport Beach-based commercial real estate firm specializing in the sale of California hotels.

The sale of the Silverado Resort & Spa in Napa Valley on February 2 is not mentioned in the report. The price was not disclosed, but the Napa Valley Register said the deal was worth $62.4 million, according to county records. That would come out to $138,975 per room.

While the number of first-half North Bay hotel sales in the report – 18 – was unchanged from a year earlier, the number of rooms in transactions rated was down nearly 12%, at 867.

Alan X. Reay, president of Atlas Hospitality Group, said there have historically been more hotel properties available for sale in Sonoma County than in Napa, Marin and Solano counties.

After Dawn Ranch, the second highest sale in North Bay was the Motel 6 property in Rohnert Park, at $14.5 million. Three other Motel 6 properties sold for a slightly lower price, at $14.2 million, $14.1 million, and $13.5 million, in Santa Rosa South, Santa Rosa North, and Petaluma, respectively.

The second-lowest price was for a Travelodge location in Fairfield, which sold for $7.3 million.

And the cheapest transaction in North Bay was $849,000 for George’s Hideaway in Guerneville, which closed.

Atlas Hospitality recently released its California hotel sales survey for mid-2022, which stated that “although sales have cooled somewhat in the first half of 2022 from the record pace set during the same period last year, they have consistently logged as the second-highest sales ever and the third-largest by dollar volume.”

However, the company expects hotel sales to decline sharply in the second half due to the rising cost of debt, uncertainty about the economy and the possibility of a recession.

Of the 18 hotel sales in North Bay for the first half of 2022, 11 of the deals were in Sonoma County; three were in Solano County; and two in Napa and Marin counties.

In terms of hotel sales for 2020, the first year of the pandemic, transactions in the United States were down 53%, he said.

For example, hotel sales in New York, Texas and Florida fell 62%, 54% and 48% respectively in 2020.

Transactions were steady in California as approximately 84 hotels were sold to Project Roomkey, the federally funded homeless relief initiative that ran from April 2020 through the end of the year. Otherwise, hotel sales in the state would have fallen between 30% and 35%, still comparatively lower than the aforementioned three populous states.

More broadly, Reay said among commercial real estate investments, hotels may be the best deal.

“The reason is that hotels are a daily business” compared to industrial, commercial or office building leases, which can last between three and 10 years, Reay said. Even if costs increase daily, such as for labor and goods, a hotel is able to adjust what it charges daily, he said.

“Most people believe that and that’s probably why we’re seeing a lot of interest in hotels (sales),” Reay said. “It’s the best product to invest in during times of inflation.”

Reay pointed out that Atlas Hospitality’s 2022 mid-year report should be viewed as a six-month metric compared to six months the previous year.

“We’ll have a much better picture when we get the year-end survey,” he said.

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