Rising hotel room rates and record tourism arrivals encouraged real estate investors to spend $1 billion buying 12 Hawai'i hotels last year.

CB Richard Ellis Hawai'i Inc., which compiled the sales data, said 2005 was a strong year for hotel investment but did not match the record set in 2004 when $1.7 billion was spent acquiring 16 hotels, including three of the state's most lavish properties in Wailea, Maui.

"There's a lot of people out there looking for hotels," said F. Kevin Aucello, executive vice president for CB Richard Ellis Hawai'i.

Just over 10 percent of all hotel rooms traded hands among institutional investment firms, private investors and developers, according to the report.

A Goldman Sachs fund made the biggest purchase last year, paying $280 million for the 1,304-room Waikiki Beach Marriott Resort.

The smallest sale was Hilo's 325-room Hawaii Naniloa Hotel for $6.1 million. That sale was for a 65-year lease on the hotel from the state. On a per-room basis, Naniloa buyer Hawai'i Outdoor Tours paid $19,000 per room.

Top dollar paid per room was for the 370-room Kahala Mandarin Oriental, which Trinity Investments bought for $476,000 per room, or $176 million.

Other properties sold last year included the Princeville Hotel, Aston Waikiki Beach Hotel, Waikiki Beachcomber, Ohana Waikiki Surf and a sister hotel, Continental Surf Hotel, Waikiki Royal Suites, Waikiki Hana hotel and ResortQuest Waikiki Beach Hotel mauka tower.

One sale that Aucello said particularly illustrated the strength of the market was Fairmont Hotels & Resorts Inc.'s sale of the Fairmont Orchid Mauna Lani for $250 million. Fairmont bought the property in 2002 for $140 million, which Aucello said was a top-dollar bid. Rising room revenues and increased competition from buyers helped drive the price up by $110 million in three years.

"As long as we see investors being real aggressive and room revenues going up dramatically, (owners) are going to be putting hotels back on the market," he said.

Aucello said 2006 is shaping up to be another active year for Hawai'i hotel sales, with seven properties currently in escrow or publicly being marketed for sale for a combined value of just over $400 million.

"I think we will see a similar level of sales activity in 2006," he said.

Reach Andrew Gomes at agomes@honoluluadvertiser.com.