The pace of California hotel sales slowed dramatically in the first half of 2007, according to a report from Irvine-based Atlas Hospitality Group.
But that doesn’t mean prices are coming down.
Orange County posted the largest and most expensive transaction with the $160 million sale of the 1,572-room Hilton Anaheim last summer to Newport Beach-based Makar Properties LLC.
The second half of 2007 is keeping pace with the estimated $200 million sale of the Laguna Cliffs Marriott Resort & Spa in Dana Point to an institutional client of Hartford, Conn.-based Cornerstone Real Estate Advisers, which was announced last week.
Overall, the number of sales in OC dropped to 11, compared to 17 in the first half of 2006. Fewer sales translated to $251.3 million in deals, down 56% from a year earlier. The decrease was attributed in part to a record year statewide in 2006, with sales topping $5 billion.
OC hotel prices have continued to climb, with the median price per room paid through June at $93,269, up 8% from the same period in 2006. For all of Southern California, the median price per room rose 16% to $101,000.
Aside from the Hilton Anaheim, the largest OC hotel sold in the first half was the 484-room Hilton Costa Mesa. The hotel was part of a 51-hotel portfolio sale by Hilton Hotels Corp. valued at $2.4 billion.
But with the ripple effect from the subprime mortgage meltdown and fewer hotels up for sale, the number of deals is likely to continue its slide through the remainder of the year, said Alan Reay, president of Atlas Hospitality.
Earlier this month, Pricewaterhouse-Coopers LLP released a forecast suggesting 3,000 fewer hotel rooms will be built in 2008 than were previously projected. The reduction is related to tighter financing for construction, according to the report.
That’s actually a good thing for the hotel market, said Don Wise, managing partner of Irvine-based Johnson Capital.
“Deals will have to have more equity and sound product,” he said. “Two guys with a cell phone and an LLC will have a little more trouble getting a loan.”
That will have little impact on projects already in the works in OC, such as the 174-room Renaissance ClubSport under construction in Aliso Viejo that’s set to open in March. ClubSport,part fitness club, part hotel,has locals and visitors in mind.
The expansion of the Grand Californian Hotel & Spa at the Disneyland Resort in Anaheim was announced in September and already is under way. It will add 200 rooms and 50 timeshares to the 745-room hotel.
The 285-room Sheraton Garden Grove, in the works for several years, is under construction and expected to open in the first half of 2008.
Existing hotels also are renovating and adding amenities.
Spokane, Wash.-based Red Lion Hotels Corp. said it would spend $10 million on room renovations on the recently acquired 314-room Radisson Hotel Maingate in Anaheim.
The Maingate joins a parade of hotels that are starting or finishing renovations this year.
– The Surf & Sand Resort in Laguna Beach completed a $6 million renovation of its rooms and Splashes restaurant in August.
– The Anaheim Marriott is planning a $20 million renovation of its concierge lounge and rooms next spring.
– Hyatt Regency Orange County expects to finish renovating its public areas by year’s end and then begin on a room renovation in the north tower next year. The total tab is $11 million.
– In nearby Industry Hills, the Pacific Palms Resort will complete a $60 million renovation by year’s end. The project included rooms, meeting spaces, a new restaurant and spa and upgrades at its two golf courses.
Renovations help hotels maintain or increase business from visitors, locals and companies.
Through August, the average daily room rate at OC hotels was $156.94, up 9% from the same period in 2006. Occupancy rose to 77.5%, up from 76.6% last year, according to PKF Consulting. The biggest gain for hoteliers was in revenue per available room,a measure of profitability,which grew 10.1% to $121.67.
The hotel market remains strong and the meetings and conventions market has been growing.
It’s typical to see Thanksgiving, Christmas and New Year’s announcements start to appear in October, but this year there are an equal number of midweek wine-tasting, cooking and dining specials along with alluring spa packages and weekend entertainment to keep the locals coming back.
Scott Blakeslee, director of sales at the St. Regis Monarch Beach Resort & Spa, said the St. Regis was designed around the idea of being a community resource.
“We started our own resort membership club for the loyal resident base,” Blakeslee said. “We’re trying to be a local hangout, not just (a place) for special occasions.”
