Fallout From Hospitality Property Crisis Will Have Far-Reaching Consequences

(MEQUON, WI) The deepening recession has prompted Americans to save versus spend, the unintended consequence of which is the fallout occurring in the hospitality sector as vacation and business travel are viewed as unavailable luxuries this year.  In California alone, there are roughly 250 hotels in default or foreclosure, according to the Irvine consulting firm Atlas Hospitality Group.   “On the surface, it is disappointing to watch a favorite hotel fall into foreclosure, and many believe that the impact stops there,” says Travis Miller, Chief Mediation Officer with Wisconsin Loss Mitigation, LLP.  â€œHowever the fallout from a hospitality property crisis will likely have far greater reaching implications than you might expect.” With revenue plunging, 36% of full-service U.S. hotels will lack the funds to pay their mortgages this year versus 21% in 2008, as reported in a study released in January, 2009 by PKF Hospitality Research.  According to Miller, there are three key unexpected consequences of this spike that he predicts may lead to a pending hospitality industry crisis.     (1)  Hotel taxes are a key revenue source for state and local governments because they traditionally target individuals who are not citizens of that state.  This is also true of rental cars.  As tax revenues dissipate due to the abundance of empty rooms, states are going to have to seek alternative sources of revenue or make hard choices, such as those currently being faced by California and its IOU program. (2)  Hospitality is a very labor intensive industry in the U.S.  Though many hotels in foreclosure are unlikely to close because debtors and their creditors still want the operating revenues, they will cut back services to save money.  And, this means laying off staff  who will fill the unemployment lines.  Income tax revenue will be lost, which will force additional costs to be incurred by the government and disseminated to the citizenry. (3)  The hospitality industry is often a key component to expansion and large transactional work that funds commercial real estate service industries such as law, civil engineering, and finance.  The fallout to these professions is equally devastating and can create an additional source for a continuation of the souring unemployment rates as high income tax payers are removed from the pool of tax revenue. “These realities combined with the fact that a hospitality industry bailout package is unlikely are very worrisome and produce the ultimate conclusion.  The hospitality industry is going to have to save itself,” says Miller. Wisconsin Loss Mitigation, LLP, has designed a three tiered program to assist troubled commercial properties, such as hotels and the small businesses that rely on outsourced work.  Through this program, WLM, LLP has deviated from traditional creditor-debtor relations related to commercial mortgage debt by interjecting an expert research and analysis phase that is conducted by a staff comprised of mortgage bankers, real estate experts, attorneys, counselors and foreclosure and finance experts.  The first stage involves the creation of a customized evaluation and report relating to an individual property’s mortgage debt and evaluates options for restructuring or alleviating a portion of that burden. At this stage, an independent expert opinion is produced for the individual property owner/entity and/or the lending institution, depending on who ordered the report. From the alternatives offered, the parties are encouraged to identify the options that seem most feasible given their individualized financial position, and to determine whether a mediation service, facilitated negotiation service, or no service would be best given their present circumstances. Depending on the elected service, WLM, LLP will compile all the necessary data and assist and work with the parties to reach a resolution through one of the other tiers represented by a mediation service or a facilitated negotiation service.  All parties will be contacted and outreach efforts will be initiated to bring all of the necessary parties to a place where a conversation and facilitated negotiation can be performed.   “This form of communication has achieved exceptional and unexpected results, because it avoids the positional bargaining stance posed by traditional litigation or negotiation efforts,” explains Miller.  â€œMoreover, providing an independent expert analysis of the mortgage debt combined with a loss analysis directed at weighing the consequences of failed bargaining is a motivating factor that brings the economic realities of failed negotiating to the surface long before the costs become apparent in the traditional foreclosure process.” “Mediation.  Communication.  Resolution.” ©


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Wisconsin Loss Mitigation, LLP is one of only five nationally recognized loss mitigation firms in the country. WLM, LLP is the only of such firms whose focus is to provide third-party, expert research, analysis of said research, and facilitated dispute resolution services for borrowers and lenders to reach a workable and intelligent resolution to matters pre- and post-foreclosure. WLM, LLP has been recognized for working with national organizations such as the United Way and HUD, providing resolution services for major lenders such as Wells Fargo Bank and US Bank, and is certified through NeighborWorks America as a foreclosure counseling organization. In addition, WLM, LLP is the only national organization to offer a facilitative mediation program, and is the only firm of its kind in the state of Wisconsin. WLM currently services consumers and lenders in 48 states, with its main headquarters located in Mequon, WI. Miller can be reached at 262-241-7060 or travis.miller@wlmllp.com.

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