Hotel foreclosures in the state of California soared in 2009 as travel declined, according to a report released by hotel sales specialist Atlas Hospitality Group.

A total of 62 hotels went into foreclosure in 2009, a jump of more than 400 percent from only 15 hotel foreclosures in 2008. The number of hotels in default also climbed up sharply, soaring by nearly 600 percent to 307 hotels.

According to Atlas analysts, a lot of hotel owners are now using their personal money to pay their loan payments because of the extremely low levels of occupancy. During the boom years of 2004 through 2007, owners were able to build a lot of hospitality properties and added a lot of rooms largely because of the easy availability of loans. During those years, lenders had incentives to make a lot of loans as investors were demanding for more mortgage-backed securities.

Atlas Hospitality president Alan Reay said that when owners exhaust their personal money and fail to find other parties for further investment or lending, they are forced to default and go into foreclosure. Many other owners are now asking themselves if they should continue paying their loans as the hotel situation still appears bad and hotel foreclosures are being sold at bargain prices.

As of December, a total of 1,800 hotels across the country owed 1,200 loans worth $28.2 billion. These loans were considered in danger of defaulting or already in default according to Pennsylvania credit rating firm Realpoint LLC.

According to Atlas, more than 80 percent of distressed hotel loans in California were made in 2006 and 2007.

The biggest hotel to enter foreclosure last year was the Marriott hotel in Los Angeles. Marriott International was reportedly selling the hotel to an investor from China for $60 million, based on a report from Real Estate Alert.

The hotel was acquired for $115 million by LA Hotel Venture LLC in March 2007. In April last year, LA Hotel filed for bankruptcy to prevent foreclosure. At that time, it had about $100 million in total assets and about $500 million in total debts.

Throughout the U.S. from January to November last year, hotel occupancy in 25 of the top hospitality markets plunged by 61 percent, according to Tennessee-based Smith Travel Research. Average room rates dropped by 12 percent compared to rates during the same period in 2008.

Los Angeles hosts the biggest number of hotels in trouble. Last year, it had 10 hotel foreclosures and 33 hotels in danger.

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