California hotel foreclosures to decrease in 2012: Atlas

Hotel default filings in California will fall substantially in 2012, down 30% to 40% and hotel foreclosures will be down 15% to 20%, according to a new study by Atlas Hospitality Group, Irvine, California.

Atlas asserts that California’s hotel property market has bounced off the bottom and is in full recovery mode. However, secondary/tertiary markets will still struggle, especially with older and somewhat functionally obsolete hotels.

The study shows that in the fourth quarter of 2011:

  • 517 California hotels are in default or have been foreclosed on, an 11.2% increase from 2010 year-end.
  • The number of foreclosed hotels increased 66.7%, up from 138 to 230.
  • The number of hotels in default actually declined 12.2%.
  • The total number of hotel rooms foreclosed on was up 74.3%, while the total number of hotel rooms in default was down 30.1%.
  • The largest hotel go back to the lender was the 331-room Hilton in Sacramento.
  • San Diego County has seen the largest number of hotels foreclosed on, increasing from 16 to 27, followed by San Bernardino County (at 22) and Los Angeles (at 17).
  • San Bernardino County leads in terms of hotels in default with 31, followed by Riverside County with 24 and Los Angeles County at 21.
  • San Diego County saw the largest decline in default filings, down 54.8% from the previous year.
  • There were two major factors in the decline in default filings, first the rising RevPAR and secondly increased hotel values.