Contributing Reporter

Hotel rooms, like all of L.A. real estate, is getting more expensive.

Reflecting everything from an increase in tourism to the ease of financing, the total volume of disclosed hotel sales in Los Angeles County skyrocketed to $639.3 million last year, from $285.6 million in 1997, according to Atlas Hospitality Group of Costa Mesa.

There also was an increase in the number of transactions, from 86 in 1997 to 94 in 1998. Of those 94 deals, the prices on six were undisclosed, so they are not included in the total dollar volume.

Along with the increase in dealmaking came a major jump in hotel prices. In 1997, the average price paid per hotel room in L.A. County was $40,796; it soared to $59,191 in 1998, a gain of nearly 50 percent.

"The business climate is good and financing is attractive," said Alan X. Reay, president of Atlas, the largest hotel broker in the state. "However, how the trend continues depends on how well the market absorbs all the new rooms being brought to market in the next couple of years."

As of August 1998 there were permits filed for 47 hotel projects in L.A. County, according to Atlas, with a total of 8,165 rooms. The biggest proposed project is part of the planned expansion of Universal Studios Hollywood, which would include a 3,000-room themed hotel.

If all these projects are built, there is some question about whether the market can absorb them. Although the average price of a room in the county rose by 8.6 percent in 1998 over the previous year, the hotel occupancy rate remained fairly static, rising less than half a percentage point, according to PKF Consulting.

The biggest hotel sold in the state last year was the Marriott Los Angeles Airport, with 1,011 rooms. It was bought by publicly traded Host Marriott for an undisclosed amount from Shearson Lehman.

The next largest hotels sold in the county were the 570-room Continental Plaza Los Angeles Airport for $38.5 million (bought by a partnership of Tishman Reality and the Dutch banking conglomerate ING from the Mexican company Sitinvest) and the 487-room Marriott Hotel in Torrance for $52 million (also bought by Host Marriott from franchisee Nippon Finance of Japan).

The most expensive hotel sold was the Loews Santa Monica at $354,839 per room, now owned by Chicago's Strategic Capital Corp.

Reay believes hotel prices will continue to rise in 1999, but at a slower rate than last year. "There are virtually no more sales by lender-owned properties, which has kept values down in recent years," he said.

Last year, there were only four lender-owned hotel sales meaning properties that had been foreclosed upon and sold by the lender accounting for just 3.2 percent of the total volume of disclosed sales. That compares with 31 lender-owned transactions in 1995 that comprised 45.6 percent of the total.

During the real estate recession of the early '90s, there were a great deal more foreclosures than there are today, which accounts for the decrease in lender-owned properties.

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