Number of Bank Foreclosed Hotels in California Shot Up to 62

by Donald Hanz on States

The number of bank foreclosed hotels soared to 62 in California in 2009, an overwhelming 313-percent increase from only 15 in 2008, based on research done by Irvine-based Atlas Hospitality Group.

The largest among the foreclosed hotels was the Marriott in Los Angeles which had 469 rooms, making LA County the highest in number of rooms foreclosed – 1,168. Orange County was next, with 638 rooms and Alameda was third, with 482 rooms. All in all, 4,468 hotel rooms entered foreclosure in 2009.

The number of delinquent hotels also rose to 307 in 2009, a sharp increase of 479 percent from 53 in 2008. The total of rooms that defaulted was 32,951, an overwhelming increase of 522 percent.

Of the 307 delinquent hotels, 81 percent took out their loans between 2006 and 2007. Of the 62 hotels repossessed by banks, more than 53 percent were bankruptcies and nearly five percent had commercial mortgage-backed securities loans.

Of the 24 counties with hotel foreclosures, Riverside had the highest number of bank foreclosed hotels – ten properties. Los Angeles and Sonoma tied for second place, with six failed hotels each. Alameda, El Dorado, Lake, San Diego and San Joaquin had three foreclosures each.

Of the 37 counties with delinquent hotels, Los Angeles had the highest number, with 33 properties in default. San Bernardino was next with 30, San Diego was third with 29, and Riverside was fourth with 22.

Based on rooms in default, Los Angeles posted the highest number, with 5,832 rooms in delinquency. San Diego followed, with 4,139 rooms in default. Alameda had 2,869; Santa Clara had 2,385; San Bernardino had 2,312; and Riverside had 2,160.

According to Atlas president Alan Reay, the hotel industry was battered by the slowdown in travel and the decline in hotel property value. The crisis spawned by record numbers of repo houses for sale has spread out into the hotel sector. Hotels plunged in value in 2009 by about 50 percent to 80 percent.

The 50-room Block at Big Bear, for instance, was valued in 2006 at $4 million. Last year, it was being sold at only $2.04 million.

According to analysts at Tennessee-based Smith Travel Research, hotel revenues in California plunged by 19 percent to only $67.47 per available hotel room in 2009 compared to 2008.

Based on data from credit rating firm Realpoint LLC, the number of bank foreclosed hotels is expected to rise in 2010 in the U.S. as about 1,800 hotels have been struggling from huge debts as of December.

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