The number of hotels bought in San Diego County has slumped almost 50% in the first six months of 2007, compared to the same time period in 2006, according to Irvine brokerage Atlas Hospitality Group.

The Group� �s mid-year survey of hotel sales has highlighted several reasons for the decline, not least the reluctance of lenders to advance high-risk loans following the collapse of the sub-prime market. Other reasons for falling sales include the rise in popularity of smaller local hotels, and the fact that most of the available space on new developments for major hotels has already been acquired. The market is also renowned for its high entry barriers and many would-be entrepreneurs or those seeking to increase portfolios are baulking at the increased risk in an increasingly uncertain financial market.

The report shows that between January and June 2007 nine inns were sold for a total of $32.7 million. However, in the previous year the figures were 18 inns for $60.57 million, but as the report� �s author Alan Reay was quick to highlight, some of this year� �s sales were package deals so the individual prices of each establishment couldn� �t be ascertained.

The drop in total sales in San Diego County reflects the trend happening throughout the State. But, although there is a decline in the total dollar volume of transactions the median price per room is rising; up 16 per cent in Northern California, with Southern California racing ahead at 33%.

Report author Reay said: � �We anticipate that sales will continue to slow through the second half of 2007 as the lending markets tighten. Lenders are increasing their margins on loans and have become more selective on the deals they choose to finance, concentrating most on hotels that have already proven performance rather than look at un-tried and un-tested projections.� �

Of course, the report was produced before the recent wildfires wreaked their devastation throughout the county and whether the rebuilding projects will impact on that market or even reverse the trend it is yet to be seen. It could be that in the short term the destruction of some of the county� �s hotels means that demand has to be filled somewhere, and could push sales and prices back up.

Prior to the wildfires it may have been a bad time to sell and anyone in the market to buy a hotel in San Diego county would have been able to negotiate a great deal. However, that may just have changed as a result of the destruction to some of the county� �s hotels.