The news seems to be going from bad to worse. The economic indicators that track occupancy, room revenue and average daily rates appear to be going from worse to still worse. The dollar value of commercial mortgage-backed securities issued in connection with hotels during the past few years is reportedly a very intimidating $30 billion (in round numbers). One of the key concerns on everyone's mind is what happens next?

There are numerous possibilities, but many of them will eventually bring to the table a hotel owner, hotel operator or franchisor, lender (and others such as the loan servicer or REMIC Trustee) and perhaps the labor unions at the hotel.

The underlying mechanism may begin with a deed in lieu of foreclosure, or the court appointment of a receiver to assert dominion and control over the hotel. Some of these matters will go right to litigation with no intervening process to attempt to negotiate a resolution. Some of these matters, and perhaps it will be a majority of these matters, will be resolved through negotiation to try to achieve a workable result and preserve any capital that might remain for the preservation of the asset rather than the payment of professional fees.

The ...