COSTA MESA, CA— With Californias hotel real estate market at a 12-year low, fire sales may start popping up throughout the state as owners continue to struggle from travel reductions resulting from the dot.com collapse, Atlas Hospitality Group said. Sales of California hotels will total about $900 million this year, down from the 1998 peak of $2.6 billion, said Alan Reay, president of the research firm. The last time sales fell below $900 million was in 1990. Business travel isnt rebounding as fast as expected and hotel owners such as Kimpton Hotel & Restaurant Group LLC may no longer be able to rely on low financing rates to weather the slump, the firm said. Through August, room revenue fell an average of 11.6% in the state, including a 26% decline in San Francisco, the worst of any U.S. market. “If the market doesnt turn around, we could be facing the point where we couldnt pay our mortgage” on some of five San Francisco hotels Kimpton is trying to sell, according to chief executive Tom LaTour. “In some cases, we have reserves, but theyre not endless.” For those transactions that have gone through recently, the states median price per hotel room, after rising 11% to $50,000 on low sales volume in the first half, will be about the same next year in Southern California and may fall 10% in Northern California as the real estate industry picks up, Reay said. One San Francisco hotel up for sale is the Pan Pacific, which Reay expects will sell for about $50 million, down from the $90 million asking price two years ago. Kimpton expects to find buyers for its properties because tough zoning laws and anti-development regulations keep new supply low, LaTour said. The five boutique Kimpton hotels would probably sell for $75,000 to $125,000 a room, down from the range of $150,000 to $200,000 they would have commanded two years ago when San Francisco was among the strongest U.S. hotel markets, said Rick Swig, president of RSBA & Associates, a San Francisco-based hospitality consultant. SOURCE: Bloomberg