San Diego County’s hotel properties were hit by the pandemic last year, when the dollar value of property that changed hands fell more than 60 percent compared to 2019 sales.

In a new year-end report released this week, Orange County’s brokerage firm Atlas Hospitality Group found that the number of transactions across the state and San Diego County remained largely unchanged year-over-year, but the value of those sales continued to decline sharply Some hotel owners have been forced to sell amid a huge drop in vacation travel.

“Properties in 2020 were sold at prices well below 2019,” said Alan Reay, president of Atlas Hospitality. “Nobody would have sold in 2020 if it hadn’t really been necessary. We are talking about the second half of the year. Sales in the first four months of 2020 were well under contract through the end of 2019. We didn’t see the full effects of the pandemic until March and April. “

In San Diego County, 22 hotels were sold last year, compared to 20 in 2019. However, those 22 hotels represented 1,565 rooms versus 4,142 hotel rooms sold in 2019, Atlas reported. This explains why the dollar value of last year’s revenue – $ 299.3 million – was well below its 2019 value – $ 767.2 million, down 61 percent.

The most famous sale in 2020, though not quite the most expensive, was the 211-room Palomar Hotel in downtown San Diego. Compare that to 2019, when a number of well-known, much larger properties were sold, including the Sheraton Harbor Island, Hyatt Regency Mission Bay, and Hyatt Regency La Jolla.

Atlas noted in its report that California was an outlier from the rest of the country based on the number of hotels sold in 2020. Nationwide hotel sales were down 53 percent, while New York state transactions were down 62 percent, Texas was down 54 percent and Florida was down 48 percent. In comparison, transactions in California rose slightly, despite the total dollar amount falling 46 percent, the sharpest decline since 2009.

The numbers could have been far worse, however, had it not been for Project Homekey, a government program that is buying up hotels to house the homeless. The largest single sale in San Diego County – the 192-room Residence Inn in Mission Valley, which sold for $ 67 million – is an acquisition by Project Homekey. Reay said the prices paid for the home key hotels were 25 percent higher than the average total per room rate for California hotels that sold last year.

Homekey’s revenue was $ 890 million last year, accounting for a third of all California transactions last year. According to Atlas Hospitality, the vast majority were closed in December.

Raymond Martz, Chief Financial Officer of Pebblebrook Hotel Trust, who recently announced that he is selling one of his more famous San Francisco hotels, Sir Francis Drake, agrees that the 2020 pandemic has resulted in far fewer sales. That’s partly the case, he said, because lenders are pulling out of the hotel sector, which means sellers are having to rely more on cash buyers.

Martz admitted that Pebblebrook was burning a sizable amount of cash – $ 20 million a month – because COVID-19 stopped traveling, but his decision to sell the Sir Francis Drake was not born out of a need to Generate revenue, he said. The company, which owns eight hotels in San Diego County, wanted to reduce its focus on San Francisco hotels, which make up 12 of its 53 hotels.

While Pebblebrook accepted a price 20 percent below its pre-COVID value, the sale made sense, Martz points out.

“We don’t sell because we have to,” he said. “We have $ 780 million in liquidity today. We acquired the (Sir Francis Drake) in 2010 for $ 90 million and the proceeds will be $ 157 million. Since 2020 was a bad year and we had a taxable loss, this is the time to sell some of your winners. We also believe there are some opportunities out there where wealth has plummeted by more than 20 percent. “

Martz assumes that the hotel market will take some time to recover.

“Just because we’re getting vaccinations doesn’t mean that this misery is over,” he said. “It takes years for these things to happen.”