St. Regis Monarch Beach, the hotel made famous by the notorious luxury retreat held by American International Group ( AIG) merely days after the company received a federal bailout, has been seized by Citigroup ( C).

Citigroup took over the 400-room Dana Point, Cali. hotel and golf course after it failed to repay a $70 million loan that was in default.

St. Regis, a unit of Starwood Hotels & Resorts Worldwide ( HOT), will continue to manage the resort and business will go on as usual, according to a statement released by the company.

Starwood Hotels is set to report its second-quarter earnings results on Thursday -- and it doesn't look pretty. The company has had to contend with the swine-flu outbreak, which kept travelers home and forced Starwood to waive penalties for canceling or changing reservations at its Mexico locations.

Analysts expect the company to earn 17 cents a share on revenue of $1.19 billion. Last year, Starwood earned 56 cents on $1.57 billion in revenue.

St. Regis is the latest casualty in the luxury hotel market. Earlier this month Starwood said it is selling its W San Francisco hotel to an investment company for $90 million.

Host Hotels ( HST), which partners with Marriott, Ritz-Carlton and Four Seasons, among others, annouced today that it swung to a loss in its second quarter and cut its full-year outlook, not expecting occupancy levels or room rates to level anytime soon.
Copyright 2009 TheStreet.com Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed. AP contributed to this report.

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