The number of hotels sold in California during the first half of 2025 dropped by 7.4% year over year, a trend that has continued for several years now.
Atlas Hospitality Group’s California Hotel Sales Survey 2025 Midyear reports that 113 individual hotels traded in the first six months of the year, down from 122 during the same period of 2024. Dollar volume increased by nearly 17.3% to $1.39 billion while the median price per room dipped by almost 2.5% to $145,566.
However, those dollar figures received a boost from three hotels that sold at foreclosure sales: the 541-room Signia by Hilton San Jose for $80 million; the 500-room Oakland Marriott City Center for $70.18 million; and the 384-room Line Los Angeles for $68 million.
These hotels sold for the prices their lenders bid at the foreclosure auctions, Atlas President Alan Reay said. If those three trades with a combined price tag of $218.18 million — or 15.7% of the dollar volume — are excluded from the survey, the average price per room in California drops by 16.5%, the median price per room is down 3% and the dollar volume “is basically just flat,” he said.
Under normal sales conditions, those three hotels would have traded at “substantially less” than what the lenders bid at their respective foreclosure auctions, Reay said. At these auctions, lenders typically get what they’re owed in their debt. Sometimes the owner puts in a lower bid to attract people to the auction, but they then give the auctioneer instructions to bid the price up to what they’re owed.
“If the property was worth that, it wouldn’t be going to foreclosure,” he said. “The owner would have been able to sell the hotel.”
The number of California hotel foreclosures seems to be increasing, Reay said. Previously, the Atlas Hospitality Group team has seen notice of defaults once every couple of weeks, but now it’s seeing two to three new notices on a weekly basis.
For hotels with loans coming due, lenders had been kicking the can down the road, but regulators increasingly are saying they can’t do that anymore, he said.
“They’re forcing their hand, and that’s what causing the notices of default to be filed,” he said.
That overall California hotel sales volume is down compared to last year isn’t surprising, Reay said. For instance, in the San Francisco Bay Area, properties are now trading at a substantial discount to their previous sale prices.
For example, the 316-key Hyatt Centric Fisherman’s Wharf sold to EOS Investors in May for $80 million, less than 50% of what owner Park Hotels & Resorts bought it for in 2019 as part of it acquiring fellow real estate investment trust Chesapeake Lodging.
“When you see these kinds of sales and how much they’re selling at a discount compared to what they previously sold for six, seven, eight year ago, it’s making buyers rethink where they’re going to be at in terms of what they want to buy,” Reay said.
In many cases, the seller’s hands are tied because they can only go down as far as what they owe on the property, he said. Also, with loans maturing, new appraisals are required to refinance, and those values are coming in lower and the borrowers still need to come in with $10 million to $15 million of fresh capital.
“So it’s putting even more pressure on sellers, and we’re seeing on a daily basis email blasts from brokers saying, ‘Price reduced, price reduced, price reduced,’” he said. “Buyers are still sitting on the sidelines waiting for what they consider good pricing.”
There’s still that gap between buyer and seller expectations for hotels, and much of that has to do with sellers that can actually sell at market prices and other properties that have to go back to the lenders, he said.