Most Endangered Hotels
The housing market isn't the only sector to suffer from the financial downturn. It's been a grim year for hotels around the world, with iconic resorts, bastions of never-say-die hipness and even budget standbys under threat of defaulting on their loans and getting re-possessed by lenders. Victims of the business travel bust include top luxury chains like Starwood Hotels & Resorts, which reported revenues down by more than 20 percent from last year. When The Four Seasons Great Exuma in the Bahamas suddenly shuttered in May 2009, would-be guests got short notice that their vacation plans had been derailed. And resorts in other popular vacation and conference destinations such as Florida and Colorado are facing similarly bleak futures, with properties no longer able to cough up what was paid for their loans.
Read on for a list of endangered hotels.
Dubai World: This government-controlled holding company in the oil-saturated Persian Gulf feels worlds away, but with investments across the planet, Dubai World's duress is making waves everywhere. The company invested recklessly, say analysts, and is facing some $60 billion in debt. Dubai World recently lost the W New York-Union Square at a foreclosure auction. And despite a perpetually happening pool scene and high occupancy rates at the Fontainebleau Miami Beach, of which Dubai World is a 50 percent owner, that resort is threatened with an overdue construction loan of $660 million (the resort had undergone a lavish renovation to the tune of a cool $1 billion when it reopened in 2008). The Fontainebleau Miami Beach is considering filing for bankruptcy to shield itself from claims in Miami and Las Vegas, where another Fontainebleau property filed for Chapter 11 before construction was complete. The newly opened CityCenter resort, casino and shopping complex in Las Vegas, owned by Dubai World and MGM Mirage, is expected to weather the Dubai World storm, analysts predict.
Vail Resorts Inc.: One of Aspen's best-loved resorts for the wondrously wealthy and famous is seeing its star dimming. Hotel Jerome, operated by RockResorts-a subsidiary of mountain resort operator Vail Resorts Inc., which owns properties in Vail, Beaver Creek, Heavenly, Keystone and Breckenridge, too-is slated for foreclosure auction in January. The historic property failed to pay a mortgage balance of more than $36 million. As highly regarded as the property is, its future looks troubling. Vail Resorts Inc. reported season pass bookings up at its Colorado ski resorts (from which it also draws profits), but by late Nov. 2009, advanced room bookings at its properties were down 13 percent compared to the previous year, with fiscal losses blamed on the struggling real estate segment.. There's been no news of other properties heading to the auction block, but keep an ear to the ground as things happen fast (and often under a shroud of secrecy) when it comes to hotel foreclosures.
Update: According to an official statement, a confidential deal was struck in mid-December between Hotel Jerome's owners and their senior lender, averting the proposed foreclosure sale of the hotel.
Red Roof Inn: Anyone who's traveled on a tight expense account has likely considered staying a night or two at this budget hotel chain found off many an interstate exit ramp throughout 36 states. But June 2009 saw Red Roof Inn default on $367 million in mortgage debt, with the company's total debt said to be upwards of a billion dollars. There's no need to cancel your reservations quite yet, however. The company is undergoing restructuring and operations are reportedly unaffected at the individual hotel level (looks like the no frills service likely won't be seeing any upgrades any time soon, either).
Extended Stay America, Inc.: The Extended Stay Hotels chain has more than 680 affordable long term stay properties throughout the US and Canada, and operates under the names of Extended Stay America, Homestead Suites and Studio Plus. Business travelers and people who've just re-located to a new city are drawn by living, dining and kitchen facilities in suite-style accommodations that are part apartment/part hotel. But don't settle in too quickly. Banks started smelling blood when the company missed payment on a $3.5 million phone bill. And Extended Stay America, Inc. filed for Chapter 11 bankruptcy protection in June 2009, making it one of the largest commercial real estate defaults of recent years. It's business as usual at the chains for now, say higher-ups, with all properties open. But with business travel down, the chain's future certainly looks shaky.
Gansevoort South: Despite a rooftop pool that's more like a liquid catwalk for South Beach beauties and famous guests like Akon and his entourage, this hip Miami Beach hotel that only opened in 2008 will be auctioned off in a late Jan. 2009 at a foreclosure sale. The developers say they hope to buy back the loan at auction and retain ownership of the Gansevoort South, but whoever 'wins' the auction will assume a whopping $314 million mortgage at a time when South Florida's many luxury hotels are struggling to fill rooms. Room revenues are predicted to be similarly sluggish in 2010 at luxury properties across the popular vacation region, and many analysts see the Gansevoort South's troubles as a harbinger of what's to come. That said, a New Year's Eve party-to-end-all-parties is still on the books here, and the much-anticipated opening of swanky STK restaurant at the hotel is supposedly imminent. The Gansevoort's Meatpacking District outpost in Manhattan is said to be uninvolved in the Miami foreclosure.