Why California hotel sales are down this year

Alan Reay, president of Irvine, California-based Atlas Hospitality Group, said several factors contribute to the decline in transactions, but a bid-ask spread is one of the largest. He noted that the largest hotel transactions in three counties (Los Angeles, Alameda and Santa Clara) were all lender foreclosure sales. Those three sales accounted for a total of $219.18 million, which is 15.7% of the entire dollar value of hotel deals for the first half of 2025. He said the most notable example was Park Hotels & Resorts’ sale of the 316-key Hyatt Centric Fisherman’s Wharf for $80 million, which was half of the previous sales price.

Reay said those foreclosure sales not only represent tremendous discounts on the properties, but they also reset the values for other hotels in those markets. That creates real problems for owners who may want to sell but still have existing debt on the hotel.

“It’s still this big spread between buyer and seller expectations and one of the things that drives that is that a lot of owners are limited to how far they can drop that price. They’ve got that debt on there,” he said. “The people that have little debt on the biggest size full-service hotels are choosing not to market, because they don’t want to take the prices that people are at.”

Reay said deals like the Hyatt Centric Fisherman’s Wharf transaction can also create unrealistic expectations for buyers.

“They’re not really sales prices because that was the number that they’re taken back by the lenders,” he said. “Now that we’re seeing these deals being foreclosed… as those sales come out, buyers review and say, ‘I’m not going to pay any more than what that just sold for.’” 

It’s still this big spread between buyer and seller expectations and one of the things that drives that is that a lot of owners are limited to how far they can drop that price. They’ve got that debt on there... The people that have little debt on the biggest size full-service hotels are choosing not to market, because they don’t want to take the prices that people are at.

Alan Reay

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One notable outlier, Reay said, was the recent sale of the El Encanto Hotel in Santa Barbara for $82.2 million.

Reay also made another distinction about the current state of hotel supply in California, with two of the largest sales in the first half actually being converted away from hotels. This exacerbates an already dire situation with a lack of new hotel supply.

“California is probably one of the only states in the union where we’re losing supply of hotel rooms. We are not keeping up,” he said. “When you take the number of rooms that are going out for alternative use or just demolition to be building something else or into homeless housing and then you look at how many new rooms are coming online. The supply is dwindling.”

Reay said there could be more transaction activity in California in the second half of the year.

“We’re going to definitely see repricing and I think we’ll start to see more activity, because there are going to be deals that banks are taking back or being sold through the bankruptcy court,” he said.  “[I expect] more activity and it’s going to be driven by the motivated, such as lenders for sales.”

Reay also said political turmoil is currently hurting transaction activity in Los Angeles.

“In Los Angeles, I can tell you that buyers who were very interested are now saying we don’t want to touch it,” he said. “They are asking, ‘Why would I go into Los Angeles? It doesn’t make sense now. I’d rather be in other parts of California, or even other parts of the country, to invest in.

“What the politicians don’t realize is that they’re creating, through their actions, lower valuations, which is going to lower their property tax receipts and it’s going to affect their budgets.”

According to the survey, the average hotel sale in California in the first half of 2025 was $12.43 million, up 27.74% YOY, while the average price per room was $149,766, down 16.43%

When asked about markets to watch, Reay mentioned San Diego, which hasn’t seen the distress in other large California markets, the Inland Empire, which recently showed up in Lodging Econometrics’ top construction pipeline markets and Orange County. 

County-by-county data

In Los Angeles County, individual sales increased by $12.5 million while dollar volume increased by 14%. The median price per room increased by 6.5%. The most expensive transaction was the $68 million foreclosure sale of the 397-key The Line LA in Los Angeles.

In San Diego County, individual sales increased by 17% while total dollar volume was up 114%. The median price per room was up 4% while the most expensive sale was the 280-key Residence Inn San Diego La Jolla for $79.34 million.

In Alameda County, individual sales increased 500% while dollar value spiked 1,715%. The median price per room increased by 173% with the largest transaction being the foreclosure sale of the 500-key Oakland Marriott City Center for $70.18 million. 

In San Francisco County, individual sales were up 150% and dollar volume increased 332%, while median price per room was up 23%. The largest transaction was the sale of the 316-key Hyatt Centric Fisherman’s Wharf San Francisco for $80 million.  

In Santa Clara County, there were only two sales, an increase from one sale in the first half of the previous year. The largest hotel transaction was the foreclosure sale of the 541-key Signia Hotel in San Jose for $80 million.