The Daily Californian Online

Hotels Hurt by Recession

By Rebecca Xing
Contributing Writer
Thursday, July 8, 2010
Category: News > Development and Capital Projects

Despite its location on the picturesque Berkeley Marina overlooking the San Francisco Bay, the 387-room Doubletree Hotel & Executive Meeting Center, a choice spot for business travelers, meeting planners and tourists, has fallen into a $160 million debt.

In May 2009, the hotel fell into default after it was unable to pay its mortgage. In June, the special servicer of the loan, Key Bank, filed a notice of default against the hotel's principal owner, Westmont Hospitality Group - which owns several hotels across the nation including six others in default - giving the group 90 days to pay the debt or risk foreclosure.

In the past two years, the hospitality industry's downturn has paralleled the nation's economic recession, affecting cities like Berkeley, which rely on hotel taxes and property rent for revenue.

"In Alameda County you have 20 hotels in default, San Francisco has 13, Contra Costa has seven," said Alan Reay, president of Atlas Hospitality Group. "That's the worst downturn we've had in the last 60 years since the Great Depression."

Though the hotel faces potential foreclosure, it has managed to continue paying rent to the city, according to city spokesperson Mary Kay Clunies-Ross.

Officials from the Doubletree Hotel and the Westmont Hospitality Group did not respond to inquires.

After Sept. 11, 2001, the hotel sector suffered a heavy blow, but recovered slowly, reaching its industrial peak in 2007-08, according to Reay. However, it plummeted again in 2009.

"A lot of hotel owners are trying to hang on and weather the storm," he said. "They've used up a lot of the reserves feeding the negative cash flow."

Reay, whose group sells California hotels, added that the state's typically thriving tourism industry has taken a turn for the worse, noting that more than 400 hotels statewide fell into foreclosure this year.

"(Berkeley's) percentage of occupancy is down a little bit, just like San Francisco," said Barbara Hillman, president of the Berkeley Conventions & Visitors Bureau. "The whole economy of the United States is affected. We're no different than New York or Florida or the rest of the country."

Despite this downturn, some are still hopeful the industry will recover.

"The economy is improving slowly but surely; you see that in hotels in terms of the slight rises in occupancy and rates," said Scott Slocum, director of sales and marketing for Hotel Shattuck Plaza in Downtown Berkeley. "I really sense the economy is starting to rebound - I think the worst is over."

Slocum noted that hotels in college towns will recover faster, adding that the Hotel Shattuck Plaza's agreement to house visiting scholars and host meetings for UC Berkeley has boosted revenues.

"It's pretty much starting to rebound," Hillman said. "I think we'll see something around the next year. There are so many variables ... it's really difficult to tell."

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