Foreclosures, defaults jolt hotel deals in Bay Area, California

Foreclosures and failed property loans this year have made an impact on hotel purchase deals in both the Bay Area and California, a new report shows.

Weakening values have also caused hotel development activity to nosedive.

“California individual hotel sales continue to lag,” Alan Reay, president of Atlas Hospitality Group, wrote in a report released by the company on hotel acquisition activity in the state.

Over the first six months of 2025, the number of hotels sold in California declined when compared with totals during the same period in 2024, according to the survey by Atlas Hospitality Group, which tracks the statewide lodging market.

Multiple factors have coalesced to weaken markets in the state.

“Higher interest rates and continued disconnect between buyer and seller price expectations continue to create downward pressure on hotel sales transactions,” Reay stated in the report.

An estimated 113 hotels were bought in the first half of 2025 in California, up 7.4% from the 122 hotels that traded hands statewide over the similar period in 2024, Atlas Hospitality Group stated.

One quirk that has arisen from the weakened hotel market in 2025 is the effect of foreclosures on the sector.

“It is interesting to note that the largest hotel sales in three counties were all lender foreclosures,” Reay stated.

Two of these foreclosures were in the Bay Area – one in downtown Oakland and another in downtown San Jose.

Here are some details of the three noteworthy foreclosures, including the value that the foreclosing lender placed on the hotels:

— In May, the Signia by Hilton hotel at 170 South Market St. in downtown San Jose was seized by its lender in a foreclosure that placed an $80 million price tag on the 541-room hotel tower.

— On July 8, the Oakland Marriott City Center, a 500-room hotel at 1001 Broadway in downtown Oakland, was taken back by its lender in a foreclosure that valued that lodging tower at $70.2 million.

— In Los Angeles, the loan on the 397-room Line Hotel was foreclosed through a transaction that valued the Koreatown-area lodging at $68 million.

The trio of foreclosures produced an outsized impact on the overall purchase activity in California, Atlas Hospitality determined.

“These three sales accounted for a total of $218.18 million of sales volume, which is 15.7% of the entire dollar volume through the first six months of 2025,” Reay wrote in the report.

The total sales volume during the first half of this year was $1.39 billion, Atlas Hospitality estimated.

During the first six months of 2025, average purchase prices were about $149,800 per room, a decrease of 16.4% from the $179,200 price per room over the first half of last year, the survey determined.

The decline in hotel prices, measured per room, was far more severe in Northern California than in Southern California.

In the north, the average sales price per room was $129,500 over the first half of 2025, down 28% from the $180,200 per-room price in the initial six months of last year.

Southern California average purchase prices were $175,900 per room in the first half of 2025, a 1.3% decline from the per-room price of $178,200 in the same period the year before.