By mid-2025, the number of hotel transactions in California slid 7.4 % compared with the first half of 2024. According to Atlas Hospitality Group’s mid-year California Hotel Sales Survey, just 113 individual hotels changed hands in the first six months of 2025, down from 122 during the same period last year. North Bay Business Journal+2CoStar+2
Despite the drop in deal count, the total dollar volume rose about 17.3 %, reaching approximately $1.39 billion, while the median price per room decreased nearly 2.5 % to about $145,566. North Bay Business Journal+1
The uptick in dollars, however, was skewed by three large foreclosure-driven sales:
- A 541-room property, Signia by Hilton San Jose, sold for $80 million. CoStar+1
- A 500-room property, Marriott City Center Oakland, sold for $70.18 million. North Bay Business Journal
- A 384-room property, The Line Los Angeles, sold for $68 million. North Bay Business Journal+1
Together, these three sales accounted for roughly 15.7 % of the total dollar volume in the period. North Bay Business Journal+1
When these outlier transactions are excluded, the average price per room falls by 16.5 %, the median drops around 3 %, and overall dollar volume is essentially flat. CoStar
Distress signals growing
According to Atlas President Alan X. Reay, the number of notices of default and foreclosures in California’s hotel sector is rising sharply. Previously averaging one or two new filings every couple of weeks, the team now sees two to three new notices each week. North Bay Business Journal+1
In the Bay Area in particular, hotel properties are trading at steep discounts compared with previous sale prices. For example, a 316-room property sold for $80 million—less than half of its prior sale price in 2019. CoStar
Reay points out: “If a property was worth what the lender bid at auction, it wouldn’t be going to foreclosure — the owner would have been able to sell the hotel.”
What this means for investors and brokers
- The gap between buyer expectations and seller price demands is widening, suppressing transaction volume.
- Elevated borrowing costs, rising operating expenses (especially labor and insurance), and tighter lending standards are reducing deal flow. North Bay Business Journal+1
- Landlords and owners facing debt maturities may find refinancing challenging as appraisals come in lower and fresh equity contributions of $10 M-$15 M may be required.
- For brokers and investors: watch the distress pipeline. New opportunities may come from lenders taking control or properties trading via foreclosure rather than traditional sale processes.
Final take
While headline dollar volume appears to have increased in California’s hotel market in H1 2025, the underlying data reveal a stagnating market once large foreclosure deals are excluded. Transaction counts are down, prices per room are falling, and distress filings are rising—signaling a hotel market under pressure rather than one simply adapting.