The Atlas report further shows that California has 2,779 roomsthat have been foreclosed on, up 455% for the year; the 27,893California hotel rooms in default represent an increase of 426%since the beginning of the year.

The report, which summarizes the California REO hotels by countyand by room count, follows Atlas forecasts earlier in the year thatsaid the state's hotel industry was facing a wave of foreclosuresas a result of the recession and financing woes facing theirowners. Alan Reay, president of Atlas Hospitality Group, saidearlier this year that the conditions in the state's hotel marketrepresented a "perfect storm" of circumstances that portended "avery bleak outlook" for California's hotels.

That forecast has been borne out by the dramatic rise inforeclosures and defaults, a trend that is expected to continue.The hotel market's troubles also have been reflected in events likeSan Clemente-based Sunstone Hotel Investors' decision earlier thisyear not to make the June 1 payment on its $65 million mortgage forthe W Hotel in San Diego. That decision reflected a "significantand continuing deterioration in demand for luxury lodging," theREIT said at the time in choosing what it termed an " electivedefault" on the mortgage. Sunstone also was involved in anotherdeal illustrating changing market conditions: the $19.3 millionsale of its 292-room Marriott Riverside hotel in Riverside to SanDiego's Pinnacle Hotels group, a price that at the time rankedamong the lowest paid per-room for a full service Marriott in theUS, according to Atlas.