Hotel Foreclosures on the Rise

July 6, 2009 No Comments »

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The number of California hotels in default or foreclosed on increased 125 percent in the past two months, according to a report from Atlas Hospitality Group.

A whopping 175 hotels in the Golden State are now in default and 31 hotels are in foreclosure.

The hard-hit counties of San Bernardino and Riverside led the state in foreclosures with 19.6 percent and 16.1 percent of the total, respectively, followed by San Diego with 12.9 percent of the carnage.

Los Angeles County has the most hotels in default, with a 12 percent share, followed by San Bernardino at 9.7 percent and San Diego at eight percent.

Non-franchised, and thus more vulnerable hotels, accounted for 87 percent of the foreclosed hotels, while franchised hotels made up 59 percent of the defaulted properties.

The review found that more than 75 percent of the loans tied to these distressed properties were originated from 2005 to 2007, meaning very few have any remaining equity.

Atlas estimates that values are currently 50-80 percent below the market peak in 2006/2007, thanks in part to a 21.5 percent decline in room revenues.

The Extended Stay and Red Roof Inn hotels chains are the most notable names suffering as a result.

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