) -- Hotel operators have benefited from the return of business travel, though leisure demand continues to lag in the recovery. While room rates and occupancy levels have improved, some individual hoteliers are not out of hot water just yet.

Several big-name hotel companies -- such as


(MAR) - Get Marriott International, Inc. (MAR) Report



(H) - Get Hyatt Hotels Corporation Class A Report

-- have shown marked improvement; yet others have been forced to file for bankruptcy protection or been foreclosed upon over the last few years. Notable among them: Palm Beach, Fla.-based

Inkeepers USA Trust

, which owns and operates hotels under brand names that include Hilton, Hyatt and Marriot;

River Road Hotel Partners

, the operator of an

InterContinental Hotel

(IHG) - Get InterContinental Hotels Group PLC Sponsored ADR Report

near Chicago's O'Hare International Airport; and

Extended Stay America

, a bankruptcy subsequently blamed on debt loaded upon the company after its leveraged buyout by

Blackstone Group


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One way to test if a company runs the risk of filing for bankruptcy is through the Altman Z-Score, a formula developed by New York University professor Edward Altman in 1968. The Altman Z-Score measures several aspects of a company's financial health -- including working capital, total assets, total liabilities, market capitalization, sales, retained earnings and earnings before interest & taxes (EBIT) -- to forecast the probability of it going bankrupt within two years. Since its inception, the formula has been 72% accurate in predicting corporate bankruptcies two years prior to the filing, according to



>> Bankruptcy Watch: 10 Riskiest Hotel Stocks of Summer 2010

On a general basis, companies with a Z-Score higher than 3 are considered safe with little danger of bankruptcy, while those with a score of 1.81 or lower are considered distressed and more likely to go bankrupt. Anything in between is a gray area.

While the formula, of course, isn't the only indicator of financial health -- and is by no means a guaranteed barometer of a company's bankruptcy risk -- it is a metric worth considering for those hotels that fall below the safety zone. Those with a declining Z-Score year over year may also raise a red flag.

Taking this into account, we offer the hotel chains with a Z-Score below 3 for the trailing 12 months, according to data from


, from the least risky to the most risky, with a little detail on what each company has been up to lately. We limited our analysis to companies with a stock price of at least $1.

Click through the slideshow to read about the riskiest hotel stocks

, or

jump directly to a graphic chart of the complete list


(Altman Z-Scores based on July 8, 2011 data.)

Sonesta International Hotels


Altman Z-Score, Trailing 12 Months: 2.23

Altman Z-Score, Last Fiscal Year: 2.23

Sonesta International Hotels


Sonesta International's Z-Score held steady at a reading of 2.23 in the trailing 12 months compared with the last fiscal year, putting its rank squarely in the gray area of safety.

Sonesta owns hotels in Boston, and leases properties in New Orleans, La. It also operates hotels in Southern Florida and tourist destinations in Egypt, and it has franchise agreements for hotels in St. Maarten, Brazil, Chile, Colombia, Peru and Ecuador.

Sonesta's first-quarter loss widened more than 60% year-over-year to $2 million, or 53 cents loss per share, while revenue jumped 22.3% to $18.1 million.

"The first quarter is traditionally a slow period in Boston, and we used that time to renovate the Hotel's 200 East Tower guestrooms. This negatively impacted revenues throughout the first quarter," the company said. Renovations at its Coconut Grove, Fla. property also hurt traffic in the "important winter season," Sonesta said.

Additionally, "in Egypt, the unprecedented political events which began at the end of January substantially affected business in the Company's seven hotels and six cruise vessels. While all of the hotels and some of the cruise vessels remain in operation, fee income from Egypt during 2011 will be negatively impacted and payment of fees and loan repayments will be delayed."

Even so, revenue at Sonesta's Boston, New Orleans and Coconut Grove properties improved year-over-year, while total operating losses grew by $700,000 to $1.9 million.


Starwood Hotels & Resorts Worldwide


Altman Z-Score, Trailing 12 Months: 1.84

Altman Z-Score, Last Fiscal Year: 1.84

Starwood Hotels & Resorts Worldwide


Starwood Hotels' Z-Score remained flat at a reading of 1.84 in the trailing 12 months, staying just inside the gray area and out of any real threat of bankruptcy.

The hotel and vacation ownership company operates hotels under the St. Regis, W, Westin, Le Meridien, Sheraton, and Four Points brands, among others.

Starwood is due to report its second-quarter financial results on July 28. Analysts on average expect it post a profit of $89.6 million, or 46 cents per share, on revenue of $1.41 billion. That would compare with

year-earlier earnings of $114 million, or 61 cents per diluted share

on revenue of $1.29 billion.

In April, Starwood said its first-quarter net income fell 7.1% year-over-year as charges related to a Japanese hotel investment pressured results. It earned $28 million, or 14 cents per share, though its profit excluding the charge would have been 30 cents per share, beating expectations by a nickel. Quarterly revenue rose 9.2% to $1.3 billion, also topping forecasts, as luxury travel picked up momentum.

>> Watch Video: Starwood's New Home: China Watch

In the first quarter, despite what CEO Frits van Paasschen called "turmoil in North Africa and the Middle East and the devastating earthquake in Japan," worldwide revPAR -- or revenue per available room, a key metric in the hotel industry that multiplies a property's room rate by its occupancy rate -- jumped 10.4%. The metric was up 11.1% in North America. RevPar had suffered in recent years as cash-strapped travelers were unwilling to pay for high-priced hotel rooms, even at luxury level establishments.

Starwood also offered an improved full-year profit guidance, or $1.60 to $1.70 per share, in line with analysts' expectations. "The outlook for the rest of the year looks promising as we view the events of the past few months as not having derailed the overall global economic recovery," van Paasschen said at the time.


Wyndham Worldwide


Altman Z-Score, Trailing 12 Months: 1.15

Altman Z-Score, Last Fiscal Year: 1.11

Wyndham Worldwide


Wyndham ranked with a Z-Score of 1.15, just inside the risky area according to Altman's algorithm, though the hotel and timeshare operator did show some improvement compared with last fiscal year's results.

Wyndham operates hotels under a wide price range of brands, including its namesake Wyndham, as well as Ramada, Days Inn, Super 8, Howard Johnson and Microtel, among others.

Wyndham is due to report its second-quarter results on July 27. Analysts on average expect it post a profit of $95.4 million, or 56 cents per share, on revenue of $1.05 billion. That would compare with

year-earlier earnings of $95 million, or 51 cents per share

, on revenue of $963 million.

In its most recent quarter, Wyndham booked a 44% jump in net earnings, thanks to rising revenue across all its business segments.

Wyndham earned $72 million, or 41 cents per share, for its fiscal first quarter ended in March. Excluding charges, its profit was 44 cents per share, beating expectations by 4 cents. Revenue rose 7% to $952 million, around $18 million shy of the analysts' consensus view.

Wyndham's lodging unit booked revPAR growth of 7.4%.

The company said in April it expects to earn a full-year profit of $2.15 to $2.25 per share, 10 cents higher than its prior forecast, on revenue of $4.2 billion.


Orient Express Hotels


Altman Z-Score, Trailing 12 Months: 1.01

Altman Z-Score, Last Fiscal Year: 1.05

Orient Express Hotels


Orient Express saw its Z-Score fall slightly in the trailing 12 months to a reading of 1.01 from 1.05 in the last fiscal year, putting it squarely in the danger zone of Altman's bankruptcy algorithm.

Orient Express -- which owns and manages 50 properties in 24 countries including 41 individual deluxe hotels, one stand-alone restaurant, six tourist trains and two river/canal cruise businesses -- is in the midst of significant executive changes. On July 8, the hotel and travel company announced that CEO Paul White resigned from his post and from the board of directors. Board chairman Bob Lovejoy, a director since 2000, was named interim CEO while a replacement is found.

Earlier this year, Chairman James Hurlock and Founder, former Chairman and Director James Sherwood announced their retirement from the board.

Orient Express is due to report its second-quarter results on Aug. 2. Analysts expect the firm to earn $11.6 million, or 11 cents per share, on revenue of $175.2 million. That would compare with a year-earlier net loss of $800,000, or a penny loss per share, on revenue of $173.4 million.

In its first quarter, Orient Express said it saw a "continued recovery of the luxury travel market," with overall revPAR up 8% in U.S. dollars. It said revenue across its geographic portfolio improved in all regions, led by 10% growth in Brazil and 27% growth in the Asia Pacific region.

Net revenue soared 48.1% to $103.1 million, while net losses widened slightly to $14.9 million, or 14 cents loss per share, in the first quarter from $13 million, or 15 cents loss per share, a year ago.


Red Lion Hotels

( GET)

TheStreet Recommends

Altman Z-Score, Trailing 12 Months: 0.96

Altman Z-Score, Last Fiscal Year: 0.84

Red Lion Hotels

( GET)

Red Lion Hotels ranked with a troublesome Z-Score of 0.96 but the hotelier showed improvement over last year's score of 0.84.

The owner, operator and franchisor of midscale and upscale full service hotels under its namesake brand, recently

voted to declassify its board of directors

, meaning its board members will be up for election each year, rather than on a staggered schedule.

On May 5, Red Lion Hotels reported that total revenue was flat year-over-year at $34.3 million for its fiscal first quarter ended in March, even as net losses widened to $4.8 million, or 25 cents loss per share, from a year-ago loss of $3.4 million, or 18 cents per share.

Despite softer results, revPAR inched up 0.2% year-over-year, while ADR -- or average daily room rates -- ticked up 0.3%.

Management said sluggish group booking led to its quarterly losses.

In an effort to recapitalize its balance sheet, Red Lion Hotels has made moves to sell some of its hotel properties, including its Seattle Fifth Avenue hotel to an affiliate of

Lowe Enterprises

and its management company,

Destination Hotels & Resorts

, which will operate the hotel under a franchise agreement with Red Lion.


Gaylord Entertainment

( GET)

Altman Z-Score, Trailing 12 Months: 0.81

Altman Z-Score, Last Fiscal Year: 0.82

Gaylord Entertainment

( GET)

Gaylord Entertainment's Z-Score softened slightly to a reading of 0.81, from 0.82, in the trailing 12 months, indicating the hotel operator has some work to do to move its ranking out of Altman's danger zone.

The Gaylord Opryland Resort and Convention Center in Nashville, Tenn. is its flagship property, and the company also operates hotels in Florida, Texas and Washington.

Gaylord recently announced plans to build an $824 million complex in Aurora, Colo., just outside Denver. The company also intends to build a similar $750 million-plus complex in Mesa, Ariz., near Phoenix, and is looking around for other locations to build potential new sites as Gaylord looks to expand in the western U.S. and capture the market for hosting conventions.

In early May, Gaylord said its first-quarter revenue increased 2.9% to $220.7 million. Net losses widened to $2 million, or 4 cents loss per share, from $1.9 million a year earlier.

RevPar increased 0.5% year-over-year, while Gaylord Opryland revPAR increased 5% and Gaylord Opryland total revPAR increased 10.3%.

Advance group bookings for all future periods were 360,338 room nights, a decrease of 31.2% year-over-year, which may not bode well for the company's full-year 2011 and 2012 results. Even so, Gaylord expects revPAR and occupancy to grow throughout this year, particularly in the second half.


Maui Land & Pineapple


Altman Z-Score, Trailing 12 Months: 0.14

Altman Z-Score, Last Fiscal Year: -0.53

Maui Land & Pineapple


Maui Land & Pineapple ranked with a worrisome Z-score of 0.14 in the trailing 12 months, but it was a marked improvement over last fiscal year's score of -0.53.

Maui Land & Pineapple is a resort operator in Hawaii, but it also develops residential and industrial real estate properties in the island state.

In May, the company booked its third consecutive quarterly profit, earning $12.4 million, or 67 cents per share, compared with a year-earlier loss of $2.7 million, or 33 cents loss per share.

But the profit was mostly attributed to the delayed recognition of $15.1 million in proceeds from the divestiture of its Kapalua Bay Golf Course last year. Another real estate sale and the settlement of post-retirement insurance plans also contributed nearly $5 million to the recent quarter's gains.

Excluding those one-time items, Maui Land booked a $2.3 million loss. Revenue from continuing operations fell 15.8% to $6.4 million.

Revenue from Maui Land's resort services edged 0.2% lower to $992,000 in the recent quarter.


Great Wolf Resorts


Altman Z-Score, Trailing 12 Months: -0.34

Altman Z-Score, Last Fiscal Year: -0.33

Great Wolf Resorts


Great Wolf saw its troublesome Z-Score edge even lower to -0.34 in the trailing 12 months, signaling the family entertainment resort company has much work to do in securing its financial stability.

Great Wolf operates family resorts with indoor waterparks and other family-oriented activities.

Great Wolf has taken steps to improve its financial flexibility in recent months. In March it completed the sale of its Blue Harbor Resort in Sheboygan, Wis. for $4.2 million, making a payment of $2.5 million to the city of Sheboygan to relieve it from all debt obligations there.

The sale also demonstrated Great Wolf's strategy of expanding through management and licensing arrangements rather than through the direct ownership of real estate properties.

In May, Great Wolf booked a 19.6% increase in adjusted quarterly EBITDA (earnings before interest, taxes, depreciation and amortization) to $18.5 million. RevPAR increased 5.2% year-over-year and average daily room rates increased by 1.7%. Occupancy improved by 210 basis points.

Great Wolf narrowed its net losses to $6 million, or 19 cents loss per share, compared with a year-earlier loss of $8.1 million, or 26 cents loss per share. Total revenue increased 4.4% to $71.9 million, which the company attributed to strengthened demand.


Morgans Hotel Group


Altman Z-Score, Trailing 12 Months: -1.5

Altman Z-Score, Last Fiscal Year: -1.38

Morgans Hotel Group


Morgans Hotel Group came in as the riskiest hotel company on


's list, with a Z-Score of -1.5, worse than a rank of -1.38 in the last fiscal year.

Morgans Hotel Group owns and develops boutique hotels, primarily in gateway cities and resort destinations including New York, Miami, Los Angeles, San Francisco, London, Las Vegas, Boston and Scottsdale, as well as in Puerto Rico and Playa del Carmen, Mexico.

Morgans is due to report its second-quarter results on Aug. 2. Analysts expect the hotelier to book a loss of $5.1 million, or 29 cents loss per share, on revenue of $56.3 million. That would compare with a year-earlier loss of $23.2 million, or 76 cents per share, on revenue of $60.2 million.

In May, Morgans announced the sale of its Royalton and Morgans hotels in New York City for $140 million to an affiliate of

FelCor Lodging Trust

, though it will continue to operate the hotels under 15-year management agreements with one 10-year extension option. Net proceeds from the sale were $93 million.

Morgans also sold its Mondrian Los Angeles hotel for net proceeds of $40 million.

In June, Morgans acquired the remaining 50% interest it did not already own in its food and beverage joint ventures from

China Grill Management

for $20 million.

See a graphic chart of the complete list of Riskiest Hotel Stocks...


Written by Miriam Marcus Reimer in New York.

>To contact the writer of this article, click here:

Miriam Reimer


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