Hotels in the Dallas-Fort Worth area are facing an increase in foreclosures this year. Hotel foreclosures in the Dallas-Fort Worth area have already tripled since 2009 and some analysts are predicting that more are to come.
“They have done everything they can to keep the property going – they’ve used reserves and deferred maintenance,” Keeling said. “The ones most in trouble are the properties that were refinanced in 2007 or 2008 with high debt or people who purchased a property just as we were going into recession.”
Many of these hoteliers will continue to succumb to foreclosure and some of the luckier ones may decide to file Chapter 11 bankruptcy to save their properties. Since the recession began, many hotels have suffered financially because holiday travelers and business travelers have cut back on their expenditures. Many expansion projects were undertaken during the boom only to be faced with empty rooms and rising debt once the recession hit. And where it may have once been easy to get forbearance agreements from lenders, many creditors are leery and cautious about extending further credit to hotels who they feel are already on the edge of failure.
Some of these creditors are looking to involuntary Chapter 7 bankruptcy to get payment out of struggling hoteliers while others are open to working with hotel owners so that they can restructure their debts either inside or outside of Chapter 11 bankruptcy. Fortunately for the hotel owners, both Chapter 7 and Chapter 11 bankruptcy offer them the ability to settle their debts and move on to more lucrative projects even during a recession. But like many individuals, some hotel owners are waiting until they have burned through most or all of their cash before they even consider how bankruptcy can help them solve their debt problems.