Industry predictions from national hotel analysts PKF Consulting and Smith Travel Research for REVPar (Revenue per Available Room) to rebound are based on increased demand and room occupancies starting in the 2nd and 3rd quarters of 2010. However, hotel workout services are expected to continue as defaults in CMBS backed mortgages are rising significantly and foreclosures are on the upswing 30-40% while nervous Lenders way their options throughout the Golden State. Many in the hotel workout services arena have already revised their projections and do not expect positive hotel economics factors to return until the middle of 2011! Add to this mix, there are cutbacks in corporate travel budgets. Major convention markets, such as San Francisco, are being faced with unions scaring away meeting business, and future event planners starting to look at renegotiating room rates from 2009 because of already reduced prices offered by Internet travel sites. Lending has all but dried up except for a few owners with strong bank relationships. Still, even with those factors weighing in, the average investor must bring 50% or all cash to acquire a distressed hotel asset right now. Hotel Neon SignBuyers, who have full funding in place and anxious to take advantage of discounted deals, are finding limited product available. This is because Sellers are holding on albeit maybe unrealistically or Lenders have yet to take the next step to call in those defaulted loans. Couple these many issues with the fact that hotel real estate valuations have fallen 35%-60% across California in one year and you have a recipe for more distress and no to slow recovery. Debtors may need to get mortgage holders on board with some sort of longer range plan and their hotel workout services team in place to implement it. My prediction – the same single factor that created the downward spiral in hotel income, values and new real estate buying opportunities is the same one that will start the Lenders foreclosing, CMBS putting their loans into receivership then sale and more owner bankruptcies. In other words, it’s the “economy.” Sound too simplistic? Good times again will drive more bad things first. Loan extension agreements will continue as an option between Owners and Lenders to preserve current defaults from escalating more.