Refinancing with poor credit

"W" hotel is a warning shot across the bows of luxury hotel industry

While many individuals are facing issues refinancing with poor credit, the malaise is spreading into the luxury hotel and commercial real estate sectors now. Many analysts (myself included) consider the commercial property meltdown to be potentially more damaging than the sub-prime mortgage mess.

The Voice of San Diego recently reported on the dire state of San Giego’s commerical property market when the “W,” an extremely high-end luxury hotel, defaulted on their mortgage, sending ripples of unease through the hotel and commercial real estate sectors.

“We are at the tip of a very, very large iceberg,” said Alan Reay, president of Atlas Hospitality Group, an Orange-County-based hospitality real estate firm. “We’re going to see a lot more of that.”

Across the country, hotel revenues have dropped off a cliff. In San Diego, those revenues are expected to drop 24 percent this year, according to a report released Tuesday by PFK Hospitality Research.

“Two-thousand-nine is going to be the worst year on record in the U.S. lodging industry in the more than 70 years that they’ve been keeping records, and 2010 isn’t going to be much better,” said Jim Butler, an L.A.-based hotel lawyer and author of the Hotel Law Blog. Voice of San Diego

It is hard to predict just exactly how bad things are going to get in the commercial sector, but early indicators suggest – very bad. Crescent resources filed for bankcruptcy protection earlier this month, and a number of commercial property funds are in serious trouble.