Owners of such hotels are increasingly handing the keys back to the lenders, and the problem is likely to get worse: As many as 1 in 5 U.S. hotel loans may default through 2010, UC Berkeley economist Kenneth Rosen said.
In some cases the lenders are simply locking up the properties, figuring they'll spend less money on watering the lawns and paying a few guards than they would on keeping the doors open.
A real estate investment trust that owns 40 upscale hotels in the U.S. recently announced plans to forfeit a 293-room Marriott hotel at the airport in Ontario to the servicer overseeing the hotel's $26.6-million mortgage. The investment trust, Sunstone Hotel Investors Inc., based in San Clemente, had announced plans in June to forfeit the 258-room W San Diego hotel because it would not support its $65-million mortgage.
The hotel industry continues to buzz about how that happened this year in the Bahamas, when a lender closed the Four Seasons Resort Great Exuma, a $350-million property built in 2003.
Small resorts also have closed in Big Bear and South Lake Tahoe, the latter involving an owner who allegedly tried to hold down costs by not paying the local room tax imposed by the city and was arrested.
"There's a lot of owners doing that these days, but it's not a good idea because the money you save doesn't belong to you," he said. "They take that seriously in South Lake Tahoe."