When the W Hotel’s owners decided to stop making their payments this June, a hospitality real estate broker told me the W’s situation was not unique:

“We are at the tip of a very, very large iceberg,” said Alan Reay, president of Atlas Hospitality Group, an Orange-County-based hospitality real estate firm. “We’re going to see a lot more of that.”

Reay sent me his firm’s update today on hotel trouble across California. The findings: The number of hotels that are in default or have been foreclosed on “jumped dramatically” in the third quarter.

And that trouble extended to San Diego.

In January, banks had repossessed two San Diego hotels, representing 20 hotel rooms. By the end of September, that number had grown to four, representing a total of 146 hotel rooms, according to the Atlas report.

Here are some even starker numbers:

The number of hotels that are in default but have not yet been repossessed grew from six hotels in January to 26 hotels in September.

In terms of rooms, that’s a huge jump from 493 rooms affected in January to a total of 3,497 rooms in September.

The highlights from Atlas’s statewide report show some more dramatic changes since the beginning of the year:

  • The number of hotels that were foreclosed on rose 213%, from 15 to 47.
  • The number of hotels in default increased 391%, from 53 to 260. …
  • California has 2,779 rooms that have been foreclosed on, up 455%.
  • The 27,893 California hotel rooms in default are a 426% increase.

I wrote about another batch of numbers Reay’s firm released in July; those ones looked at a weak market for hotel sales.


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