Hotels in California are suffering with foreclosures

Hotels in California are facing trouble as unemployment racing on and competing with foreclosures.

Foreclosure of hotels increased by 27% as unemployment caused cuts in business travel.

Foreclosures increased to 79 estates. In the end of last year it was 62. This was stated by Atlas Hospitality Group. Defaults shot up by 6.5% to count to 327. Atlas Hospitality Group based in Irvine deals in buying and selling of hotels.

Hotel business in USA is battling declined room rates, decrease in occupancy and the like, following the worst recession since the 30’s. In California the unemployment stands at 12.5%. Business houses have reduced their travel expenses and this has meant less flow of cash to the hotel industry.

Alan Reay the president of Atlas Hospitality Group said, “If we look throughout the US. – States like Florida, Nevada, Arizona and California are tied very closely to the housing boom and that was a big driver of the economy there. Hotels that are suffering the most are in areas with high unemployment.” He was speaking in a telephone interview.

Outside Los Angeles, Riverside in California noted the foreclosure of nine hotels during the first quarter. San Bernardino saw eight foreclosed hotels and Los Angeles noted foreclosure filings of seven hotels. Another 38 hotels in Los Angles are defaulting, as per the findings of Atlas.

The revpar or revenue per available room in the hotels of California fell by an average of 3.5% during last January and February compared to the same two months in the previous year. However some hotels in the northern regions of California reported increases. Central California hotels continued to languish as the estates along the coastline in Los Angeles saw little alterations.

Reay explained, “Most hotels that have been in trouble will still struggle through 2010 because of the amount of debt they have. Even with increased revenue, they can’t cover their debt service.”

According to his calculations over 1,000 hotels in California are functioning because of forbearance understanding with lenders. The latter have modified their loans that are poised to mature.

Reay further added, “One bright spot in California is that there is a tremendous amount of interest from overseas buyers, particularly from Asia and China. They are seeing this as a great bright buying opportunity.”

According to Atlas 90% of the hotels that have been foreclosed were independent.

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