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In Orange County, California - Hotel Sales Shrunk in the First Half of 2008
Due to the Credit Crunch; Valuations Holding Up

By Sandi Cain
Orange County Business Journal Staff
October 6, 2008

Orange County (California) hotel sales shrunk in the first half of 2008 due to the credit crunch and a big 2007 sale that skewed comparisons for this year. 

The dollar value of hotels sold in the first half was 80% lower than a year earlier, as 2007’s numbers were carried by the $200 million sale of the Hilton Anaheim, the largest hotel in the county. 

Topping this year’s list of hotel sales by price was Hawthorn Suites Orange, which Orange-based Balboa Investments sold for $11 million to BW Orange LLC of Orange. 

The number and size of hotels sold dropped as the credit crunch played out and potential buyers pulled back, according to Alan Reay, president of Irvine-based market tracker Atlas Hospitality Group. 

“The financial market crisis in housing is hitting some in commercial real estate now,” he said. 

The upside: local hotels kept their value and average prices for rooms increased. 

In all, there were seven sales in the first half of the year, compared to 11 a year earlier, a 36% drop, according to Atlas Hospitality. That’s on top of a 36% decline in 2007 from 2006. 

The slowdown in what was a hot hotel sales market as recently as 2006 may not be over. 

While buyers have backed away, sellers still are holding out for 2007 prices. 

“It’s a challenging market,” Reay said. “Buyers want proven performers with strong cash flow, and sellers need to be realistic on sales prices.” 

The total dollar volume from sales of mainly smaller hotels and motels was $48.3 million in the first half, compared to $251.3 million a year earlier, led by the Hilton Anaheim. 

Some other sales in the first half were for the 124-room Heritage Inn Fullerton near California State University, Fullerton, which sold for $10 million; the 104-room Americas Best Value Inn & Suites Orange near The Block at Orange, which sold for $10.5 million; and Abby’s Anaheimer Motel in Anaheim, which sold for $3.5 million. 

Three of first-half sales were in Laguna Beach: the Best Western Laguna Reef Inn, By the Sea Inn Laguna Beach and Laguna Beach Senior Living. 

Laguna Beach Senior Living is a former motel that’s been operating an assisted living center. New owner Positive Investments of Arcadia plans to convert it to a bed and breakfast. 

California also saw sales drop. 

The state saw the number of hotel sales fall by 44% in the first half of the year, while the total dollar volume dropped 39% to $1.2 billion from $2.2 billion. 

Median Price 

The median price per room statewide dropped by 14% to $83,370. But in Orange and Los Angeles counties, the median price per room increased — by 16% to $108,259 in OC and by 46% to $123,529 in Los Angeles. 

That value extends to OC room rates, which are up 2.8% to $157 from the first half of 2007, according to PKF Consulting. Occupancy dropped slightly to 75.3%, down from 77.3% a year ago. 

“Values are holding or increasing in Los Angeles and Orange counties,” Reay said. “That means those who bought high are still breaking even.”

Sandi Cain is a freelance writer and contributor to the Orange County Business Journal and meetings industry publications. She specializes in hospitality, tourism and travel. Cain holds bachelor’s and master’s degrees in education from Kent State University in Ohio, where she majored in social studies. A former high school teacher, she has written for niche-market sports publications in the U.S., England and Australia and formerly worked in both the printing and high-tech industries. A Cleveland, Ohio native, Cain hasbeen a resident of Laguna Beach since the late ’70s. She enjoys travel, gardening, reading and spoiling her three cats.

Sandi Cain
Contributing reporter
Laguna Beach CA
Phone: (949) 497-2680
Fax: (949) 606-8447
Cell (949) 292-3279

Also See: Slightly Fewer Orange County (California) Hotels Sold Last Year, But Prices for Those Sold Nearly Tripled; Ritz-Carlton Among Southern California's Top Hotel Deals of 2006 / Sandi Cain / March 2007
California Hotel Buying Seen Keeping Pace With 2004’s Record; The Hotel Market is Sizzling Again / Sandi Cain / April 2005


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