IRVINE, CA-The number of California hotels in default orforeclosure increased during the third quarter, but an even biggerstory may be lurking in the shadows—the shadow inventory ofproperties that are in trouble but have yet to hit the defaultmarket. Alan Reay, president of Irvine-based Atlas HospitalityGroup, tells GlobeSt.com that his firm’s research suggests “a hugeshadow inventory of distressed deals that are yet to hit thedefault market” could be up to 1,000 hotels in addition to the 529in default or foreclosed already. California’s total hotel count isapproximately 10,000.

A newly released Atlas survey of distressed hotels in Californiashows that the 529 in the state represent a 10.7% increase from thesecond quarter 2010 and 71.2% increase over the third quarter of2009. The 529 figure includes 119 properties that are inforeclosure, up 71.2% over the third quarter of 2009, and 410 thatare in default, up more than 58% from the third quarter of lastyear.

The trends are not all downward, however. The number offoreclosed hotels selling to new buyers ticked up in the thirdquarter, a trend that Atlas expects to continue through the fourthquarter and accelerate into 2011.