It’s a buyers market for hotel investors in the Tri-Counties
For hotel investors looking to break into the market, the Tri-Counties — particularly the southern end of the region — may be the place to turn.
The area has seen a boom in hospitality listings over the past year, and it extends beyond high-end, high-profile properties.
Ventura’s Clocktower Inn was listed in February for $5 million by Amber Hotel Co., a brokerage firm based in Agoura Hills. The firm is also helping to sell two other relatively inexpensive motels in the tri-county area. A Comfort
Inn on the Pacific Coast Highway in Oxnard is listed for $5.8 million, and Cambria’s Bluebird Inn is on sale for $6 million.
Two other Ventura County properties went up for sale last year. The historic Pierpont Inn, located on the bluffs above the beach in Ventura, is up for sale again after changing hands three times over the past seven years, said Jim Luttjohann, Ventura Visitor’s and Conference Bureau executive director. When a family trust involving Grace Ahn bought the Pierpoint from Scott and Spencer Garrett in 2009, the property was listed for about $16.5 million.
Now, it’s listed for $8.5 million, about half the price it commanded three years ago.
The Brakey House, a seven-room bed and breakfast on Poli Street in downtown Ventura, is on the market for $1.8 million.
Luttjohann told the Business Times that small, modest hotels play an important role in Ventura County’s hospitality scene. Most of the county’s lodging options are three-star hotels like the Clocktower or limited service motels like the Comfort Inn, Luttjohann said, and visitors to the area look for that level of accommodation.
In Santa Barbara County, the Petersen Village Inn is listed at $16 million with Central Coast Landmark Properties. The four-star hotel is located in the Santa Ynez Valley and caters to tourists visiting Solvang and regional wineries.
At the upper end of the hotel spectrum, downtown Santa Barbara’s Canary Hotel is in the process of being sold to Kimpton Hotels & Restaurants for an eye-popping price of $40 million, or $400,000 per room. Bacara Resort & Spa, one of Santa Barbara County’s most luxurious hotels has gone on the market just six months after Ohana Real Estate Investors bought the 360-room property for $104 million. Ohana may double its money in the sale.
The marketplace for motels and economy hospitality properties is separate from that of their more lavish counterparts, said Jeff Lugosi, senior vice president at hotel consultant company PKF Consulting. “Unlike a very unusual property like Bacara, which is a one-off, sales of these smaller hotels are about the art of the deal,” Lugosi told the Business Times. “The participants have different motivations. It’s a totally different ballgame.”
Lugosi said small, budget-minded hotels, which are often part of motel chains, are considered commodities rather than unique real estate opportunities. There are buyers and sellers at all different price levels in the hospitality business, Lugosi said, and budget hotels are often good buys for investors who are trying to break into the hospitality business.
Properties like Ventura County’s 50-room Clocktower Inn and 95-room Comfort Inn and San Luis Obispo County’s 37-unit Bluebird Inn don’t command the same high room rates as a high-end resort, but they make up a significant portion of the hospitality market.
“Well-run motels drop a significant amount of money to the bottom line. They can yield very good returns,” Lugosi said.
In Ventura County, small hotels tend to have higher occupancy rates than larger ones. Hotels with less than 100 rooms were 56 percent full in January, while properties with 100 to 199 rooms were 48 percent full ,and those with over 200 rooms had a 51 percent occupancy rate. “These small hotels all have the potential to be very good investments if they’re marketed to the right audience. Certain tourists might prefer something like the Pierpont or the
Clocktower because they’re not standard corporate hotels,” Luttjohann said.
The Clocktower Inn is a common wedding and meeting venue, and the Pierpont is well-known in the community, Luttjohann said. Though he hasn’t heard of any serious potential buyers, he said both properties could be great assets if they have solid management and marketing teams behind them.
The Comfort Inn’s occupancy rate was up to 53 percent in 2011 from 44 percent in 2009. The motel’s room revenue in 2011 was $1.1 million, according to Amber Hotel Co.
In Cambria, room revenue at the Bluebird Inn for 2009, the last year statistics are available, was $887,282. Average daily occupancy was 56 percent, down from 72 percent in 2007.
Amber declined to release room revenue and average occupancy for the Clocktower Inn. The property was converted from a firehouse and clocktower to a hotel in 1987.
Motels like the ones for sale in Ventura County and San Luis Obispo County are significantly less expensive than resorts like Canary and Bacara. The relatively low price of budget hotels can make them good investments, but it also means they’re cheap for other developers to build and buy.
But Lugosi said the big problem with buying low-end hotels is that they’re easily circumvented by new supply. The properties aren’t unique, he said, so they’re open to competition from other inexpensive hotel chains. “It’s much easier to build a new Comfort Inn in Ventura County than it is to build a new Bacara.”