As the hotel industry continues its climb from the effects caused by the global COVID-19 pandemic, the California hotel sector is hitting record numbers. In one transaction, which is planned to close later this year, Irvine, Calif.-based Sunstone Hotel Investors is looking to spend $177,5 million, or $2,088,235 per room, to acquire the Four Seasons Napa Valley hotel, according to a statement from the company. This marks the third-highest price per room ever paid in California behind the Maybourne in Beverly Hills, which sold in December of 2019, and the Hyatt Alila Ventana Inn Big Sur, which sold in June of this year.
The seller of the 85-room property was Boston-based Alcion Ventures, which just completed and opened the property earlier this year.
Sunstone did not return calls asking for comment on the sale before this story was published, and Alcion did not respond to an email requesting commentary about the sale, either.
The remarkable price paid for this hotel also coincides with the short proximity of other record-breaking prices paid for hotels. “We go into COVID, the biggest downturn ever experienced in the hotel business, and lo and behold we come out with three transactions all over $2 million per room,” said Alan Reay, president of Irvine-based Atlas Hospitality Group. The three transitions were the Hyatt Alila Ventana Inn Big Sur, the Montage Healdsburg, which was purchased by Sunstone, and the Four Seasons in Calistoga.
“There’s definitely a lot of capital out there, and if you have hotels that are in A+ locations with huge barriers to entry, there seems to be no ceiling or no cap on the price per room the buyers are willing to pay today,” Reay added. “It speaks volumes for long-term prospects for California and the fact that you simply can’t duplicate this product.”
The sale of luxury hotels has trended along with the general hotel industry direction over the first half of 2021, according to Atlas’ research. In their semi-annual hotel industry survey, Atlast saw that individual hotel sales across the state were up approximately 157 percent, the highest in recorded history. Record dollar volume of hotel sales also reached $5.2 billion. Additionally, the average price per room went up approximately 13 percent compared to the last six months of 2020.
“You have this kind of velocity in terms of hotels trading…They’re seeing this coming back v-shaped and they’re looking at 2022 being back to 2019 numbers,” Reay said.
According to the survey, investors are continuing to bet on the long-term health of California’s hotel industry, with many believing the state will rebound in the next several years.
“It’s amazing. No one could possibly have predicted these kinds of numbers. A bounce-back just doesn’t do it justice…I think what this shows us is that obviously a huge investment interest in California, there’s a tremendous amount of capital sitting on the sidelines. They’re obviously buying into the future of California because none of the prices that they’re paying are making any sense on the current numbers. These investors are looking at the longer term and everybody is basically voting with their checkbooks to say, ‘We believe California prices are going to continue to climb,’” Reay said.