California hotel foreclosures up 91%

A market survey by Atlas Hospitality Group released this week shows that hotel foreclosures in California increased 91% year-on-year in the second quarter.

The number of California hotels in default or foreclosed on was 478, including hotels on all service levels both independently owned and under franchise brands. The highest amount was concentrated in the San Bernardino and Riverside counties in the Inland Empire area of suburban Los Angeles.

Atlas said the main cause of the defaults was banks taking an aggressive position on foreclosure due to the backlog of properties defaulting on mortgages.

“Obviously the market is improving, but we still have a backlog of hotels that are holding too much debt,” said Alan Reay, Atlas Hospitality Group president. “This is happening mainly the secondary and tertiary markets.”

However, Reay pointed out that the market is improving given that quarter-on-quarter foreclosures are down 4% and that less foreclosure notices are now being filed. Atlas expects the number of California hotel foreclosures to increase at least through the end of the year and for notices of default to continue to fall.