According to an article in the Star-Telegram, Extended Stay Hotels LLC filed for Chapter 11 bankruptcy protection on Monday due to massive debt and declining business travel.
The article said:
"The tightening credit markets, the reduction in construction activity and increased unemployment have decreased the demand for extended-stay accommodations, as fewer construction sites, consulting opportunities and travel plans are coming to fruition," the company said in court documents.
As companies face declining sales, many are opting to forego business travel which is negatively impacting the travel industry, causing many travel related companies to face declining profits and bankruptcy. Last year hotel occupancy rates began to slowly drop; but after September, hotel occupancy rates took a nose-dive causing many travel related companies to quickly implement job losses to cut their losses.
Extended Stay Hotels' bankruptcy stands as a symbol of what many travel related companies are facing, large debts and few profits. According to their bankruptcy papers, Extended Stay Hotel only had $7.1 billion in assets in 2008 and $7.6 billion in debt. The company says its hotels will remain open while it restructures its debts in Chapter 11 bankruptcy. If they are unable to successfully restructure their debt in Chapter 11 bankruptcy, they may face liquidation.