San Diego made history last year when the upscale Inn at Rancho Santa Fe sold for a stunning $1.2 million a room — even as the volume of hotel transactions experienced one of the biggest declines the county has seen in 15 years. The pricey sale of the 85-room inn belies a distressing trend seen not just locally but across the hotel real estate market statewide: a sharp downturn in sales fueled largely by high interest rates and a skittishness among lenders to finance costly transactions.
Meanwhile, overall hotel room occupancy, while laudable compared to other markets, has yet to return to the levels seen in 2019. 'Top-line revenue growth stabilized in 2023, and most of that growth happened in the first quarter in 2023 and has slowed each quarter thereafter,' Hise said. 'That’s because travel trends have normalized. You also have expenses increasing, which makes it harder to reach that higher net operating income, and you have more debt.