Five major U.S. hotels filed for chapter 11 bankruptcy protection in February: the Arizona Biltmore, Phoenix; Doral Golf Resort, Miami; La Quinta Resort and Club, Palm Springs, Calif.; Claremont Resort, Berkeley, Calif.; and the Grand Wailea Resort, Maui.
CNL-AB LLC, an affiliate of Paulson and Co., a New York City–based hedge fund company, acquired the five hotels in January 2011 and filed for bankruptcy shortly thereafter to eliminate debt and stave off foreclosure.
“This filing provides the new owner with the opportunity to further restructure the company's debt at the property level and to improve operations during a time of recovering fundamentals in the hospitality industry,” stated company officials. The filings will have no impact on staff, operations, or the customer experience, officials said.
CNL-AB also recently acquired the Ritz-Carlton, Grande Lakes and the JW Marriott Grade Lakes in Orlando as well as the JW Marriott Desert Ridge in Phoenix, but it has not declared bankruptcy for these hotels.
The properties are the latest victims of the recession, which has affected a large number of hotels over the last two years. In California alone, 465 hotels were in default or foreclosure at the end of 2010, according to Alan Reay, president, Atlas Hospitality Group, Irvine, Calif., who noted that the number of hotels foreclosed upon increased 122 percent in 2010 over 2009. While Reay tracks distressed properties only in California, the trend has been nationwide.
However, with(revenue per available room) numbers increasing and the economy getting stronger, he predicts improvements ahead. “I think we will see a leveling off on foreclosures for hotels in the U.S. in the second half of 2011,” Reay said. “For meeting planners, I would recommend locking in rates now, as hotels are already starting to push ADR (average daily rate).”