Tax-Exempt, Economy Hotels Lead Transaction Activity

CoStar Analytics

March 20, 2024 | 12:34 P.M.

First-quarter hotel sales in Los Angeles have declined 92% compared to a year ago, and since the city government enacted a transfer tax on residential and commercial real property — dubbed a "mansion tax" — in April 2023.

Only one Los Angeles-area hotel — the SpringHill Suites Lancaster Palmdale — has sold in the first quarter this year, generating nearly $14 million in sales volume. In the first quarter of 2023, nine hotels sold in the market, at a total sales volume of almost $171 million. From 2019 through 2023, 12 hotels on average have sold in the first quarter in the market, at an average volume of $156 million.

Since April 2023, 13 of the 24 hotel transactions in the broader Los Angeles area were in the economy class. All but one sold for less than $6 million. The economy-class Extended Stay America Los Angeles - LAX Airport sold for $50.7 million, or $381,120 per key, but was one of the tax-exempt transactions slated for conversion.

The other tax-exempt hotel to sell was the 294-room Mayfair Hotel to the City of Los Angeles for $60.3 million, or $204,923 per key. The upper-upscale sales volume would have only been $8.5 million without that transaction.