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Distressed Hotels Sell Luxury for Cheap

Many top hotels are cutting rates to make the transition through debt restructuring or even foreclosure as seamless as possible.

LAS VEGAS (TheStreet) -- When the Ritz-Carlton Lake Las Vegas closes its doors on May 2, it won't come as a surprise to guests.

The announcement by the resort's owner,

Village Hospitality

, came in early February, allowing potential guests and nearly 350 resort employees the ability to plan their vacations and good-byes. The situation reveals why it's not always bad to book a hotel that's going through financial woes.

The Former Mondrian Scottsdale gets new management and name.

Few properties go the extreme route of closing, like the Ritz-Carlton, Lake Las Vegas. In fact, few distressed properties lose business. The property is usually transferred from distressed seller to a new buyer without any interruption aside from management or staff changes.

The Scottsdale, N.Y.-based

Morgans Hotel

, which owns or has stakes in such hot properties as the Hudson Hotel and Miami Delano, failed to reach a deal to restructure the debt on its only Arizona property. The Mondrian Scottsdale eventually ended up in foreclosure after an unsuccessful auction and was ultimately returned to the lender, who then signed

GF Management

to a new long-term management agreement. Philadelphia-based GF Management operates mostly three-star business hotels across the country, with the exception of the high-end US Grant Hotel in San Diego and Royal Palm Resort in Miami.

The esteemed Mondrian name was ultimately stripped from the Scottsdale resort as well as the Asia de Cuba restaurant and Sky Bar hot spots that went with it. While the Mondrian was a draw to visitors from Los Angeles and New York, the renamed Theodore Hotel will have to start from scratch in trying to lure back the A-list crowd and business travelers.

In an upscale suburb of Detroit,

Ritz-Carlton Dearbor

n recently announced its parent company would remove its brand from what has been the city's top luxury hotel for more than 20 years. Widely reported economic woes and a general downturn in luxury business travel likely resulted in the hotel's sale to an undisclosed investment group that then hired Colorado-based Greenwood Hospitality to manage the property. The new owners, like many buyers of distressed properties, will likely go in a cheaper direction. While the Ritz name will be gone, the hotel's iconic mid-rise design will remain.

In early April, owners of the

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St. Regis Resort Hotel & Spa, Monarch Beach

said they sold the Southern California resort to Seattle-based Washington Real Estate Holdings after its owners defaulted on $70 million in


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loans. The site became famous after

American International Group

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executives planned a luxury retreat there after the company received federal bailout money.

Over the course of the hotel's financial turmoil, guests were still offered the same St. Regis experience but with more discounts available during off-peak weekends and months.

In fact, travelers often find deep discounts at distressed properties looking to maximize their downturn revenue. Many top hotels have been cutting rates to make the transition through debt restructuring or even foreclosure as seamless as possible. The Four Seasons Hotel San Francisco, which avoided foreclosure by partnering with New York's

Westbrook Partners

, dropped its room rates to as low as $325 per night on weekends from a high of $595 in its heyday.

At the

Marriott International

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-managed Stanford Court in San Francisco, rates have dropped to $159 per night after the owner reportedly defaulted on a loan from


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. Services at both hotels, aside from a scaling back of staff and lower rates, remained mostly unchanged.

Summer travelers worrying about their hotels going bust have little to worry about. However, travelers should anticipate that more than a few brand-managed properties will likely go through name changes before the end of the year. In reality, being part of W Hotels or Four Seasons brand is an expensive undertaking, especially for struggling resorts in fledgling or second-tier vacation markets. While the hotels rarely close, travelers might need to decide if a stay at a Mondrian or W or Ritz by any other name is just as sweet.

Reported by Michael Martin of in Los Angeles.

Michael Martin is the managing editor of -- a luxury travel and lifestyle guide based in Los Angeles and London. His work has appeared in In Style, Blackbook, Elle, U.K.'s Red magazine, ITV and BBC.