IRVINE, Calif .– Gov. Gavin Newsom’s Homekey Project accounted for $ 890 million in hotel sales in California last year, reviving what would have been a paltry year in terms of hotel deals in the state.
As hotel sales across the country fell due to the coronavirus pandemic, California was the only state to record a year-over-year increase in hotel transactions, Alan X said. Reay, President of Atlas Hospitality Group.
“Project Homekey has helped hotel owners who were looking to sell last year but didn’t have other takers at the prices they expected, that’s where Project Homekey came in,” Reay told Spectrum News. “Without Project Homekey, California would have seen 26% less single hotel sales and 61% less total dollar volume.”
With little to no domestic and international tourism, the coronavirus pandemic has devastated the hospitality industry nationwide. Many hotels have closed and many rooms have been empty for most of the year. Hotel owners have had to work with their lenders to avoid bankruptcy or foreclosure, Reay said.
According to Atlas Hospitality’s annual California hotel sales survey, last year the total number of hotels that swapped hands in the United States fell 52% year-on-year. Hotel sales in New York, Texas and Florida were down 62%, 54% and 48% respectively from the previous year.
California was the only state to record a year-over-year increase in hotel transactions, in large part thanks to the Homekey project. In addition to the Project Homekey hotels, several large hotels have exchanged hands in Southern California. The 116-room Viceroy L’Ermitage Beverly Hills in Beverly Hills sold for $ 100 million. In Newport Beach, the 532-room Newport Beach Marriott Hotel & Spa was the largest hotel sold in 2020 and the most expensive hotel priced at $ 216 million, according to the report.
Newsom launched Project Homekey in June to house the homeless and those at risk of homelessness amid the coronavirus pandemic by converting hotels, apartments and other buildings into temporary or permanent housing and with supportive services .
Newsom used $ 600 million from Coronavirus Aid Relief Funds and state funds before allocating the money to local municipalities to acquire hotels and other buildings. Los Angeles County received $ 247.4 million from the state. The state awarded Orange County $ 23 million and Riverside and San Bernardino counties approximately $ 13 million each.
“Homekey is a unique opportunity to massively expand homeless housing in California with federal stimulus funds,” Newsom said in a press release in July. “This unique opportunity requires us to act quickly, working closely with our city and county partners, to protect our state’s most vulnerable people. “
The program was important. It has successfully accommodated homeless people and people at risk, and helped cash-strapped hotel owners.
“For existing hotel owners, this is good because they are getting retail prices for their properties, instead of dealing with many ‘struggling’ hotel buyers in the market,” Reay said. “Second, it removes a lot of supply from the market, so existing hotel owners should be able to benefit from higher room rates as the market recovers.”
The program is not without fail. There have been reports of mismanagement and inexperience in caring for residents living in these converted hotels. Also, no one really knows what effect these Project Homekey hotels will have on neighboring hotels and their values.
Nonetheless, Newsom will continue to move forward with plans to purchase more hotels and other types of property to be converted into permanent housing for the homeless. Newsom’s proposed budget set aside $ 750 million for the second round of the Homekey project.