In a regular year before the pandemic, hotel sales that traded for more than $1 million per key could easily be counted on two hands. Except in 2012, when 12 properties achieved that level of price per room, sales of this magnitude were not common.

This year proved to be another exception as 10 hotel sales for more than $1 million per room were reported by the CoStar research team this year. They accounted for four of the 10 most expensive hotel property sales since 2011.

Here are some of the hotel sales that stood out to industry observers that could give an indication of future sales trends for luxury hotel properties.

The Ventana Big Sur made the list of most expensive hotel sales per room twice this year. It first sold in June from Geolo to Hyatt Hotels and Resorts for $148 million before re-selling 90 days later to Host Hotels and Resorts for around $3 million per key. Geolo is the investment vehicle for a member of the Pritzker family, so a sale to Hyatt for just under $150 million was not surprising.

International hotel parent companies are increasingly shedding assets under an “asset-light” strategy so Hyatt likely encumbered the property with a long-run management contract before trading it to publicly traded Host Hotels and Resorts while retaining name and management rights. According to Hyatt, the 50-room property has additional development potential and is located in an area with natural barriers to entry for competitors.

The 130-room Montage Healdsburg opened in December 2020 just as the American leisure customer returned to the road. It was sold only four months later from Ohana Real Estate Investors to a subsidiary of real estate investment trust Sunstone Hotel Investors for $265 million or around $2 million per key.

The sales price indicates the strong desire of buyers to participate in the upside potential for high-end resorts which have done exceptionally well during the pandemic. Despite this blockbuster acquisition, it did not save Sunstone CEO John Arabia’s job. Arabia left the company “by mutual agreement," according to a company statement, just four months later.

Sunstone was also involved in the sale of the Four Seasons in Napa Valley. The hotel had only been open for 60 days when Sunstone purchased the 85-room property for $177.5 million or just over $2 million per key. The property includes a working, 4.5-acre vineyard and the Elusa Winery.

The property lies two hours north of downtown San Francisco and is expected to attract leisure transient and small, high-end group demand, a segment that has held up well during the pandemic. Sunstone had financed part of the deal by selling the 340-room Embassy Suites La Jolla for $226.7 million.

Blackstone’s disposition of this iconic casino with just over 3,000 rooms was noteworthy for its sheer size. Blackstone originally acquired the property from Deutsche Bank, which had taken possession and development responsibility after the initial developer backed out during the Great Recession. Blackstone bought the gaming property for $1.7 billion in late 2014, or roughly $575,000 per key. Seven years later, the private equity giant sold it for $5.65 billion, $3.09 billion of which was allocated to the casino portion of the deal. This equates to a price of just over $1 million per room.

According to Blackstone, this was its most profitable transaction for a single-asset deal ever recorded, as the firm netted around $4 billion in income from the trade. Another noteworthy aspect of the deal was that the group of purchasers included a REIT subsidiary of Blackstone.

These trades, and others like it, show that investor interest in well-built, high-end hotel properties remains strong. Unlike business travel, leisure demand has not waned in the pandemic. On the contrary, it has proven to be very robust.

In addition, the high-end leisure traveler is much less price sensitive than other travel segments, as can be seen by the luxury room rates recorded by STR, CoStar's hospitality analytics firm. Through October of this year, luxury class occupancy was only around 51%, which is 28% lower than it was in 2019. But the average room rate for luxury class properties was $337, which is 11.5% higher than it was in 2019. So, even though half the rooms stood empty, operators were able to realize real pricing power.

We expect that these fundamentals will continue to drive hotel investors and operators in 2022 to carefully examine the high end of the market for opportunities, and for premium properties to command prices that are on par with 2019 results.