The number of California hotels in default or foreclosure increased during the third quarter, but an even bigger story may be lurking in the shadows-the shadow inventory of properties that are in trouble but have yet to hit the default market. Alan Reay, president of Irvine-based Atlas Hospitality Group, tells GlobeSt.com that his firm's research suggests "a huge shadow inventory of distressed deals that are yet to hit the default market" could be up to 1,000 hotels in addition to the 529 in default or foreclosed already. California's total hotel count is approximately 10,000.
A newly released Atlas survey of distressed hotels in California shows that the 529 in the state represent a 10.7% increase from the second quarter 2010 and 71.2% increase over the third quarter of 2009. The 529 figure includes 119 properties that are in foreclosure, up 71.2% over the third quarter of 2009, and 410 that are in default, up more than 58% from the third quarter of last year.
The trends are not all downward, however. The number of foreclosed hotels selling to new buyers ticked up in the third quarter, a trend that Atlas expects to continue through the fourth quarter and accelerate into 2011.
Reay cites two major factors causing the increase in sales of foreclosed hotels: Lenders are realizing the difficulties in running an operating business like a hotel, and are deciding to sell verses hold; and buyers are willing to pay higher prices than before.
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