In the first quarter of 1999, Orange County had only one hotel sale,the 320-room Buena Park Hotel, now the Radisson Resort at Knott’s Berry Farm that sold for $17.5 million. This year, Orange County has seen a total of five hotels change hands in the first quarter. These are:
n Anaheim Motel, 33 rooms, for $1.4 million
n Casa Laguna, Laguna Beach, 22 rooms (bed and breakfast) that sold for $2.4 million
n InnCal, Garden Grove, 131 rooms, for an undisclosed amount
n Sandman Motel, Garden Grove, 51 rooms, for $1.8 million
n Travel Inn, Anaheim, 37 rooms, for $1.3 million
Rising interest rates for hotel loans have not had the same dampening effect on the California hotel resale market as elsewhere in the country and Orange County is now seen as one of the hottest markets in the U.S. in which to invest. This is primarily due to positive economic fundamentals and a diverse tourism market as well as the lack,so far,of new hotel competition. With prices for new hotel construction reaching as high as $70,000 to $80,000 per room, many investors see the purchase of existing hotels as an attractive alternative.
In the first quarter of 1999, there were 23 hotel sales in California; for the same period this year, there have been 43 sales,an 86% increase. Southern California saw 30 of those, while 13 were in Northern California.
It is anticipated that sales volume for the remainder of 2000 will continue at a record pace as new buyers flood the market and sellers of smaller properties trade up to larger hotels, typically franchised properties that tend to be newer and in better condition.
Room rates continue to climb throughout most of OC, helping to offset the increased cost of financing. Overall county room rates were up 3.3% through April this year. Anaheim, which had suffered a slight decline in rates in January and February due to soft occupancy, had a surge in March that boosted its year-to-date rates by 2.9%. Anaheim, however, will most likely continue to see soft occupancy until the resort-area renovations are complete.
Many investors, however, believe there will be a significant increase next year with the opening of Disney’s California Adventure and the completion of the last phase of the Convention Center remodel. All but one of OC’s hotel sales in the first quarter were in the Anaheim/Garden Grove area near the resort development.
,Alan Reay, Atlas Hospitality Group
