Developer are increasingly talking about how the U.S. hotel world will see a “huge increase'” in foreclosures in 2012 as debts come due and financing remains hard to come by, Bloomberg reports.
A foreclosed hotel is one in which the owner is unable to make mortgage payments.
The lack of money means greater odds that guests will notice cost cutting or signs of a lack of investment, although hotel managers typically try to do the best they can to make sure guests won’t notice their property’s financial troubles.
“You’re going to see a huge increase of hotel foreclosures,” Robert Sonnenblick, chairman of Sonnenblick Development, said during the Bloomberg Commercial Real Estate Summit in New York.
According to another developer, boutique hotel pioneer Ian Schrager, the expected flood of hotel foreclosures is also ruining some plans to build new hotels. Here’s what he told Bloomberg:
“It’s very difficult to build when everybody’s anticipating there’s going to be a flood of existing assets at opportunity costs to buy,” said Schrager, who estimates he can build new hotels in New York City for as little as $400,000 per room.
High-end hotels in major U.S. cities such as New York, Boston and San Francisco have recovered more than other markets so far during the recovery, the piece notes.
In the past couple of years, we’ve seen a range of foreclosures especially at high-end and luxury properties including Starwood’s W Atlanta-Downtown and Capella Telluride hotel in Colorado’s ski country.
