PALM BEACH, FL-When Chatham Lodging Trust reported its quarterly earnings less than two weeks ago, the publicly-traded hotel REIT pointed to the growth potential of its joint venture deal with Cerberus Capital Management. The companies won 64 hotels for $1.125 billion in a bankruptcy auction in May and were supposed to close in August. Now, the deal is suddenly off.

As GlobeSt.com reported on Monday, Chatham and Cerberus on Friday terminated their commitment and obligation to acquire interests in 64 Innkeepers USA hotels. The termination clause was worked in to the terms and conditions of the May 16 agreement. The deal failure will impact Innkeeper’s exit from Chapter 11, since paying off its credits was contingent on the bankruptcy sale of the assets. Innkeepers USA could not immediately be reached for comment.

In a press statement, Chatham said the deal was nixed “as a result of the occurrence of a condition, change or development that could reasonably be expected to have a material adverse effect on Innkeepers' business, assets, liabilities (actual or contingent), operations, condition (financial or otherwise) or prospects.”

Chatham CFO Dennis Craven did not return calls seeking comment. Cerberus spokesperson Michael Kontos tells GlobeSt.com neither company is discussing the details of its decision. Kontos declined to speculate whether or not the companies would form another joint venture on the hotel investment front.

Jean Francois Mourier, CEO of Miami-based Revpar Guru, tells GlobeSt.com the failed deal is likely a culprit of the down economy, including Standard & Poor’s decision to downgrade America’s credit rating, Dow Jones losses, and Europe’s financial woes. Mourier expects to see hotel acquisitions slow in the months ahead.

“It’s a nightmare to do large deals in difficult economies," Mourier says. "We’ve seen deals like this come and go. It’s not the first time and it’s not the last. The deals that will work in this economy are the smaller deals.”

To Mourier’s point, Chatham purchased five Innkeepers hotels, which closed on July 14. Specifically, Chatham purchased the Residence Inn Mission Valley, Residence Inn Anaheim, Doubletree Washington, DC, Residence Inn Tyson’s Corner, and Homewood Suites San Antonio for $195 million.

The good news, at least for now, is hotels aren’t seeing any dramatic decline in revenues. The bad news is that consumer confidence is low and if it continues to diminish Mourier predicts tourism will soon feel the impact. “People are nervous,” he says. “But it’s going to take at least a couple of months for these issues to make their way down to the hotel industry.”