In a significant transaction within California’s hospitality market, Laguna Beach’s iconic Pacific Edge Hotel has changed hands for $80 million, making it the largest hotel sale in the state so far this year. The property, known for its oceanfront location at 647 South Coast Highway, was purchased by Dune Drifter, a California-based hospitality investment entity with ties to the Marriott family.
The sale, equating to $640,000 per room, marks a notable increase from the $57.5 million price paid by the previous owners, Highgate Hotels LP and Morgan Stanley & Co., in 2017. The property’s new ownership plans to proceed with a significant renovation initially proposed by Highgate, according to a report the Orange County Business Journal.
Built in 1963, the Pacific Edge Hotel occupies a prime coastal location just south of Laguna Beach’s downtown district. The 125-room property spans 44,687 square feet, with an additional 4,000 square feet of meeting space and two popular restaurants, The Deck and Driftwood Kitchen. The hotel’s design reflects its decades-long history, featuring nine buildings across 11 parcels, each with its own architectural style.
The planned renovations aim to unify these diverse structures, enhancing the property’s appeal while maintaining its historic charm. Proposed changes include remodeling nonconforming facilities, adding new office and conference areas, and expanding dining options with a new café and additional seating for the existing restaurants. The renovations are expected to push the all-in cost per room to over $1 million.
The renovation plans, which were approved by the city council in 2021 and later by the California Coastal Commission, have garnered strong support from local unions and community leaders. Unite Here Local 11, representing hotel workers, praised the project for its potential to increase coastal access for working families and set new standards for the region.
However, the transition to unionized operations, a condition of the Coastal Commission’s approval, could pose financial challenges. Industry insiders note that union hotels often face higher operating costs, which may impact profitability. Despite these concerns, the renovation includes a commitment to make six rooms more affordable at $130 per night, aligning with community advocacy for greater coastal access.
Dune Drifter, led by private equity professional Cramer Williams and Chris Harrison, grandson of hospitality titan Bill Marriott, represents a strategic shift toward local ownership. While Dauntless Capital Partners, the firm co-founded by Williams and Harrison, is not involved in this acquisition, the transaction underscores their deep-rooted connections in the hospitality industry.
With this acquisition, Dune Drifter intends to bring new life to the Pacific Edge Hotel, leveraging its prime location in Laguna Beach, a market known for its strong demand and high room rates. The renovation is expected to position the hotel as a leading destination in Southern California, potentially attracting a mix of both leisure and business travelers, the report added.
While the project still faces several hurdles, including securing final permits and navigating the complexities of operating a unionized hotel, the planned improvements are expected to enhance the guest experience and solidify Pacific Edge’s status as a premier oceanfront destination.
