Extended Stay Hotels has filed for bankruptcy protection, the victim of the same combination of factors behind the recent foreclosures and bankruptcies involving some high-profile luxury hotels.

"The bankruptcies to date share two attributes: acquisition at or near the peak of the market and high leverage," said Bjorn Hanson, a professor at New York University.

Indeed, Extended Stay said in its bankruptcy filing that it was overleveraged after Lightstone bought the group of nearly 700 hotels near the peak of the market in 2007 from the Blackstone Group for $8 billion.

The midprice hotel operator said in its Chapter 11 filing in federal bankruptcy court in New York that it has about $7.1 billion in assets and $7.6 billion in liabilities.

"Extended Stay is significantly overleveraged, and the projected cash flows cannot continue to service over $7 billion in debt," Joseph Teichman, Extended Stay's secretary and general counsel, said in a declaration filed in the case.

Teichman said Extended Stay's revenue has dropped because of decreased business spending on travel.

While luxury hotels have been hit the hardest by the downturn in travel, Hanson said the only real trend in distressed assets to date is debt and time of development or acquisition.

Markets such as Phoenix and Las Vegas, for example, have been especially hard hit because of the amount of development during the peak.

And Extended Stay, unlike some chains that just manage or franchise the bulk of their properties, owns all its hotels.

"The hotel companies facing the greatest distress are the real estate owners, because they are paying all the taxes and operating costs in the face of lower revenues," Hanson said.

Earlier this month, the lavish Fontainebleau resort being built in Las Vegas filed for bankruptcy. Two W hotels, in San Diego and Scottsdale, Ariz., are in foreclosure. The owners of the leveraged Aviara resort near San Diego are trying to oust Four Seasons as managers of the property because of budget issues.

Analysts say the number of distressed properties will only grow as the year goes on. Still, Hanson said he expects there will be fewer bankruptcies and foreclosures than in the recession of the early '90s.

"Bankruptcy is a last resort because lenders generally do not want to take over hotels," he said. "Hotels require extra amounts of attention and capital, so the lenders are being extra flexible and cooperative in working with hotels facing financial distress."

Operator pledges 'same great service'

HVM LLC, which manages Extended Stay's 684 hotels in the U.S. and Canada, said the company's bankruptcy filing should have no impact on operations of the hotels.

"Extended Stay Inc. has turned an important page in restructuring its debt and recapitalizing its business," said Gary DeLapp, president and CEO of HVM, "but for hotel guests, the story is the same: the same great service, the same convenient locations, same comfortable, value-priced hotel rooms."

HVM is a separate company that manages Extended Stay's brands, which include Extended Stay America, Extended Stay Deluxe, SM Homestead Studio Suites Hotels, StudioPLUS Deluxe Studios and Crossland Economy Studios.

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