San Diego County experienced the largest number of foreclosed hotels in California, with 27 going back to their lenders in 2011.
The county had 16 foreclosed hotels in 2010. It also had a total of 2,995 rooms returned to lenders in 2011 -- a 76.6 percent increase from 2010, when the foreclosures accounted for 1,696 rooms, according to an Atlas Hospitality Group report.
Some notable San Diego-area hotels that went back to their lenders in 2011 include the 220-room Holiday Inn on First Avenue in downtown San Diego, the 200-room Comfort Inn on Hotel Circle Place in Mission Valley, the 176-room Marriott Courtyard on Jefferson Street in Old Town and the 141-room Lake San Marcos Resort & Country Club in San Marcos.
While San Diego County saw more foreclosed or deed-in-lieu-of-foreclosure hotels last year than anywhere else in the state, it saw the largest percentage decline in hotel default notices, dropping by 54.8 percent from 31 in 2010 to 14 in 2011.
By number of rooms, the San Diego-area hotels in default actually dropped by 81.7 percent year-over-year from 4,681 to just 858.
While foreclosures were up all over the state, Atlas Hospitality noted the number of hotels in default declined statewide by 12.2 percent from 2010.
Outside of San Diego, San Bernardino County had the next highest number of foreclosed hotels with 22, followed by the county of Los Angeles with 17 and Riverside County with 16.
By contrast, Napa County had only one hotel foreclosure in 2011.
In total, 517 hotels were in default or had already been foreclosed on in the state last year -- an 11.2 percent increase from 2010. The largest hotel to go back to the lender was a 331-room Hilton in Sacramento.
The total number of hotel rooms actually foreclosed on in the state was up 74.3 percent, while the total number of hotel rooms in default was down 30.1 percent.
Default is the first step in the foreclosure process, and not all properties in default actually go back to the lender.
Although foreclosures picked up here and across the state last year, Alan Reay, Atlas Hospitality Group president, expects a different picture in 2012.
Reay cited at least a couple of reasons for his optimism: For one thing, many of these troubled properties have already been returned to their lenders.
Secondly, with RevPAR (revenue per available room) and occupancies climbing each month, Reay said it would be foolish to foreclose on a property that, while in technical default, is still paying its landlord.
"We are predicting that the number of hotel default filings will fall substantially in 2012, down 30 to 40 percent, and hotel foreclosures will be down 15 to 20 percent," Atlas wrote. "There is no question that the hotel market has now bounced off the bottom and is in full recovery mode. The only area that we see as struggling is the secondary/tertiary markets, especially when you have older and somewhat functionally obsolete hotels."
Reay said, "If you go back to 2009, we were predicting there would be 2,500 hotels (in California) that had little or no equity."
"Now, with the market coming back strongly, lenders who don't want to push bondholders to the brink are willing to give borrowers a little more time. They see the light at the end of the tunnel," he said.
Hotel developer and consultant Robert Rauch agreed there should be fewer hotels heading into foreclosure this year.
"I think there will likely be more technical defaults," said Rauch, who also suggested that extensions and workouts may give hotel owners more time than they have had in a while.