Big Hotels Face Bankruptcy

From Martha C. White in the New York Times:

Hotels have been struggling for months as businesses and individuals cut back on travel. But what was a bad situation is likely to turn worse as a rapidly growing number of hotels — including many high-end and luxury properties — are forced into bankruptcy or foreclosure in coming months.

Jim Butler, a hotel industry lawyer, said those who manage distressed hotel loans have told him that their workloads have jumped tenfold in recent months.

“Things seem to be accelerating,” Mr. Butler said, and predicted that before the recession is over, the number of hotels in bankruptcy or foreclosure could rise above the 2,000 or so reached in the industry’s last big downturn in the 1990s.

The names on the front of the troubled hotels are well-known management companies like Ritz-Carlton and InterContinental. But the owners of the hotels are investment groups, wealthy individuals or companies that specialize in lodging and are generally little-known outside the industry.

Many owners took out loans to finance new construction or renovations when hotel occupancy rates were up and credit was readily available — just the opposite of the situation now, as those short-term loans are coming due.

But it is the management companies that risk damage to their reputations since theirs are the featured names.

Guests, too, can be affected if a hotel is financially troubled. Even at high-end properties, in-room electronics and linens may be older or show more wear, and items like coffee or fresh flowers in the lobby may be eliminated.

“Hotels are doing things like closing the restaurant two nights a week or having the nightclub only open one or two nights a week,” said Molly Vincent, vice president of a destination and event management company in Las Vegas.

In some cases, guests may not even notice what they are lacking. If a hotel stops a project to add flat-screen TVs halfway through installation, for example, a traveler is not likely to know that.