Hotels: worse than you thought

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Atlas Hospitality Group presented a bleak snapshot of California hotel sales today in its annual mid-year survey.

Only 49 hotels changed hands during the first six months of this year, compared to 100 a year ago, the Irvine hotel industry analyst said. And the number of hotels now on the market spiked 53% in the first six months of 2009.

Atlas President Alan X. Reay said that California is facing a record low in the number of sales, and a record high in the number of hotels that are up for sale.

“It’s really a perfect storm for California hotels right now,” he said. “If we continue at this pace, it will take 10 years to sell all the hotels on the market. And that is if there aren’t more hotels that become available for sale. ”

There are 941 hotels currently on the market, meaning there are more than 19 hotels unsold for every one that is sold. The typical ratio is closer to 2 to 1, Reay said.

To move forward, there needs to be a complete repricing of the market, he said.

In Los Angeles County alone, the number of hotel transactions plummeted 91% in the first half of 2009.

The county also leads the state in the number of hotels having trouble paying their lenders. One of them, the 469-room Marriott Hotel in downtown Los Angeles, is the largest hotel in default in California.

California has a total of 250 troubled hotels that are either in default or lender owned. Reay said he expects that there will be more than 500 troubled properties by the end of 2009.

“If there’s any silver lining in this report,’ he said, ‘it’s that this is going to be the best buyer’s market in the last 20 to 25 years.”

-- W.J. Hennigan