Westin San Jose listing seen as test for troubled Bay Area hotel industry
The potential new owner would be poised to harvest a considerable upside in performance
SAN JOSE >> The Westin San Jose, a landmark downtown hotel also known as The Sainte Claire, is up for sale in a deal that could demonstrate the strength — or underscore the fragility — of the Bay Area lodging market in the wake of the coronavirus.
The 171-room Westin San Jose, which was built in 1926, is considered one of the architectural gems ofthedowntowndistrictoftheBay Area’s largest city.
“This hotel deal is going to be a really good test as to the health of the hotel market, especially in downtown San Jose,” said Alan Reay, president of Irvine-based Atlas Hospitality Group, which tracks the California lodging market.
Just down the street, the Fairmont Hotel closed its doors in March, the same day it toppled into a Chapter 11 bankruptcy case to reorganize its finances. The bankruptcy proceeding is ongoing.
Eastdil Secured, a commercial real estate firm, is marketing Westin San Jose for sale.
“The offering presents a compelling opportunity to acquire a prominently located, full-service hotel in a leading gateway market
that benefits from an efficient operating structure, superior Westin brand affiliation, and additional value-add opportunities,” Eastdil stated in the brochure.
Terms weren’t immediately available.
“This will be a good market indicator as to how deep or how shallow is the buyer pool for hotels that rely almost exclusively on business travelers and convention events,” Reay said. “People who are buying hotels today are expecting a very sharp V-shaped recovery for the hotel business.”
In 2017, South Koreabased Aju Hotels and Resorts paid $64 million for the Westin San Jose, according to Santa Clara County property records. The seller was Wolff Urban Development, a firm controlled by developers Lew Wolff and Keith Wolff. Lew Wolff is a former co-owner of the Oakland A’s baseball club.
The Wolff-led group undertook a wide-ranging renovation of the hotel a few years before selling.
“Following a comprehensive $7.2 million repositioning in July 2015, Westin San Jose established itself as downtown San Jose’s premier full-service hotel and one of the city’s most recognized architectural landmarks,” Eastdil stated in its marketing brochure.
The Westin San Jose upgrade worked out to $42,000 per room, according to the Eastdil offering package.
The ultimate price that a buyer winds up paying for the hotel could furnish an important clue as to the true health of the Bay Area lodging market and how
severely it was affected by the coronavirus.
The hotel’s performance suffered greatly during 2020, a year dominated by a collapse worldwide of the travel, hotel, and restaurant sector, and measured by weak occupancy levels and room rates.
During 2019, occupancy levels averaged 76.2% at the Westin San Jose, according to the Eastdil marketing package. But during 2020, occupancy plummeted to 36.2%. Eastdil says occupancy levels are expected to average 47.3% in 2021, 69% in 2022, and 76.3% in 2023.
Other lodging industry experts have predicted that the Silicon Valley hotel sector will recover more quickly than its counterparts in Oakland and San Francisco, although a full recovery isn’t expected in the South Bay until 2023.
“San Francisco, San Jose, Anaheim, and downtown Los Angeles are among the hardest-hit parts of the hotel industry right now,” Reay said. “But buyers are lined up to buy these hotels right now.”
A new owner of Westin San Jose is poised to harvest a considerable upside in performance, especially with major projects underway and being planned including Google’s transit village near the Diridon train station, in the view of the Eastdil brokers who are marketing the iconic lodging.
“The hotel has a strategic downtown San Jose location in the heart of the city’s renaissance driven by Google, mass transit, technology, and residential developments,” the marketing brochure stated.