Petaluma hotel files bankruptcy

Sonoma County hotel owner Kirk Lok is seeking bankruptcy protection for his Quality Inn in Petaluma, saying business has fallen sharply with the recession.

?This is the most difficult year I ever experienced,? said Lok, who also owns a motel in Sebastopol and is planning to build a resort on the Russian River near Guerneville.

The Sebastopol motel and proposed Guernewood Park resort are not part of Lok?s Chapter 11 filing. But the Russian River project is on hold until the economy improves, he said.

The 109-room Quality Inn on Montero Way in Petaluma will remain open while Lok reorganizes the business, he said.

?We hope to have a plan in place in the next couple of months,? Lok said. ?We want to make sure all our vendors and creditors are taken care of.?

The petition filed Sept. 8 in U.S. Bankruptcy Court in Santa Rosa lists $7.3 million in assets and $3.9 million in liabilities for Lok Redwood Empire Properties, the company that owns the Quality Inn.

Lok declined to disclose occupancy data for the Petaluma property, but said business is down about 20 percent over the past year.

?It?s the most drastic downturn we?ve ever seen,? he said. The Lok family has owned the Petaluma motel since 1985.

He?s not the only innkeeper reporting a drop in business.

Average occupancy at Sonoma County?s full- and limited-service hotels is down 14 percent, the county Tourism Bureau said last month. But some properties are down 25 percent, said Ken Fischang, who heads the bureau.

Luxury hotels around the country are under particular stress and in danger of defaulting on their loans as occupancy rates fall and the credit crunch makes it difficult for owners to refinance.

An estimated $24.5 billion in loans secured by more than 1,500 hotels may be in danger of default, Bloomberg reported Thursday, citing a new report by Realpoint LLC, a credit rating company.

In San Francisco, a $90 million loan secured by the Four Seasons San Francisco, a 277-room, five-star property, is 90 days delinquent and foreclosure proceedings have begun, Bloomberg reported.

The Quality Inn in Petaluma is a mid-range hotel, with rooms starting at about $90 a night. Lok said the hotel never defaulted on its loan, but needs to restructure the business to get through the downturn.

The Petaluma motel reduced staffing and cut other expenses as business fell off, Lok said. It now has about 25 employees.

The Lok family is committed to keeping the motel open, he said.

?It?s an asset that?s vital to the community,? he said.

Lok has been a leader in Sonoma County?s tourism industry, helping establish the Sonoma County Lodging Association and currently serving on the board of the Tourism Bureau.

He also owns a separate hotel in Sebastopol, the Fairfield Inn & Suites. Earlier this year, Lok finished a $2.5 million renovation of the 82-room property, re-branding it from a Holiday Inn Express.

Last year, Lok proposed a 120-unit resort on the Russian River at Guernewood Park, just west of Guerneville.

The $25 million, 9.7-acre project also calls for a restaurant and spa. The project is still in the county approval process.

?We hope at some point when the economy recovers we?ll have an opportunity to develop that,? Lok said.