Hotel Receivers Face Long Stay -- and Rich Rewards
The Wall Street Journal reports: The growing wave of US hotels defaulting on their debt has spawned a growth industry for companies that oversee and operate hotels seized by lenders.
In many cases, the companies taking over the ailing properties own their own hotels as well. The new business is helping them hang tough during one of the worst hotel markets since World War II.
Real-estate research company Real Capital Analytics now classifies $18 billion in hotel loans as distressed, meaning they are delinquent, in foreclosure, in bankruptcy or have been restructured by lenders. That compares with just $1.3 billion in distressed loans on hotels a year ago.
A foreclosure doesn't always mean a big operator, such as a Marriott International Inc., will stop managing a hotel or licensing its brand to it. But, in some cases, a brand will drop a hotel in response to a previous owner's customer-service shortfalls or refusal to renovate the property.
Another challenge for interim managers: hanging on to the conventions and group meetings booked at those properties. Contracts for such events often allow the visiting groups to cancel if the hotel goes into foreclosure or receivership.
That happened at the 331-room Wigwam Golf Resort & Spa near Phoenix. Interim manager Destination Hotels & Resorts, a unit of Lowe Enterprises, took over management of Wigwam in May after the resort went through receivership and into bankruptcy.
By then, the Wigwam had lost several conference bookings amid the management upheaval of the previous weeks. Destination hustled to retain the rest, succeeding in some cases but not in all.
"It takes a lot of work to convince a client that we're still going to be here in six months when they bring their group in, and we're going to service that event," said a Destination senior vice president.
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Posted by: Matthew Stone