Hotels, especially California hotels, have been among the hardest-hit segments of the real estate industry in the economic downturn. While the distress of several high profile hotels in the state, including the W San Diego and the St. Regis Monarch Beach, has made national news, the depths of the distress in the California lodging industry goes well beyond these headliners. According to reports issued by Atlas Hospitality Group in April, at least 406 hotels in California are either in default or have been foreclosed on by the lender.

The improving national economy and the beginning of a rebound in lodging fundamentals has led some prognosticators to suggest that the lodging industry might lead the real estate recovery. National occupancy rates grew 5.9% in March, while revenue per available room recorded a 3.8% in- crease during the same month. In spite of these promising fundamentals, the outlook in California is unsettled.

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