Hotel owners across the country took a thrashing during the recession as occupancy, room rates and values plunged, but investor interest in Los Angeles inns is bouncing back as the market begins to recover, according to a new report.
Investors spent $154 million to buy hotels in Los Angeles County through August of this year, four times as much as was spent in all of 2009, according to brokerage Jones Lang LaSalle Hotels.
Buyers are looking for bargains, of course. The largest group of hotel sellers in the current cycle has been "special servicer" companies that deal with problem mortgage securities and lenders that foreclosed on properties acquired during the market peak between 2006 and 2008.
Sales this year included L'Ermitage in Beverly Hills for $45 million, the Marriott Los Angeles Downtown for $63 million and the nearby Hilton Checkers for $46 million. Hotels on the market include the Sheraton Universal in Universal City and the Sheraton Delfina in Santa Monica.
The hospitality industry measures success in terms of revenue per available room — RevPAR, as it's known — determined by multiplying a hotel's occupancy rate by its average daily room rate. Los Angeles' RevPAR rose 6.3% during the first seven months of the year, nearly double the national average of 3.3%. Most of that came from an increase in occupancy, because room rates have barely budged upward.
"The first wave of recovery in the last six to nine months has mostly been occupancy in the transient sector — corporate travel and leisure travelers taking advantage of deals," said John Strauss, managing director of Jones Lang LaSalle Hotels.
Innkeepers in a few popular markets such as New York, San Francisco and west Los Angeles County have been able to increase room rates, but prices are projected to hold steady in most destinations for almost another year.
"We'll see aggressive rate growth in mid-2011, 2012 and 2013," Strauss said, as overall demand for rooms grows.
Los Angeles is one of the largest and most diverse lodging markets in the world, Jones Lang LaSalle said, with more than 98,000 rooms in almost 1,000 properties.