Video Transcript:

(Eds. Note: The W Hotel is owned by Sunstone Hotel Investors Inc, not "Sunroad Hotel Investors Inc" as mentioned in this interview.)

GLORIA PENNER (Host): One of downtown's hippest and most luxurious hotels is headed for foreclosure.  The W defaulted on its June mortgage payment, after the owner decided the hotel is no longer worth the $65 million that is owed on the property. Laurie Weisberg is a reporter with the San Diego Union-Tribune. She's been covering the story. So Laurie, when the W opened seven years ago it was upper-class swank. You had to go, just to look. What a fast fall. Is it the economy?

LORI WEISBERG (San Diego Union-Tribune):  Very much so. Well, it's a couple factors, but truly the economy. In this deep of a recession people are going to cut back. They're going to cut back first on luxury hotels. They may still do some family vacation but they're going to stay at the much more moderately priced hotels, so this economy hit the W hard, but the other problem was all of a sudden you've got a bunch more luxury boutique hotels you've got the Keating, the Se hotel, the Ivy, the Hotel Solamar, and then you have a convention center hotel that opened in December, 1,200 rooms. 

PENNER:  But you know you have to take a look at the owners who is Sunroad(sic) Hotel Investors, Inc. Did they overestimate the market or underestimate the downturn?  Or did they simply sink too much money into the property?

WEISBERG:  It's a little of both, I mean they probably thought the economy, tourism was going to continue to go great, but they paid far too much for the hotel at the time, they purchased it for $96 million, their loan is $65 million, and they think it's worth even less than their loan now. They just couldn't compete in this market.

PENNER: Yet, there haven't been too many luxury hotels in San Diego that have reported trouble, one in north county, the Four Seasons Aviara. But is the W the canary in the coal mine for downtown? Can we expect more luxury hotels to foreclose?

WEISBERG: I think that's what the hotel analysts, the travel industry analysts are saying, that it is something like a canary in a coal mine, that you're going to see more of this, unless they bought early enough and didn't sink too much money. I mean the W just a year ago sunk a lot of money, we don't know how much, into a big renovation, and these kinds of hotels have to do that to keep up.  So yeah, they just put too much money in and they underestimated the recession.

PENNER: So is it the fact that maybe luxury is going out of fashion in this recession? Are we seeing other leisure oriented businesses showing the same kind of trend?

WEISBERG: Well recently, I did a story on the very high-end, upscale restaurants, and they are having a lot of trouble attracting people because people are going more to chain restaurants or their neighborhood restaurants so they too are having to cut back, we just recently saw Laurel, a long-time fine-dining restaurant closing. It's gonna be a pizzeria.

PENNER: It's closing?

WEISBERG: It's closing.  It's reinventing itself as a pizzeria italian neighborhood restaurant, nothing over $20 a plate.

PENNER:  Well that's different. Finally, is San Diego generally overbuilt with hotels downtown? We hear of another hotel on the waterfront that's going to open soon.

WEISBERG: Right, exactly.  Right now, it seems like they're overbuilt, especially downtown, I mean of course when you have a convention like Comic-Con you'd think "Well then they need it" but you don't have Comic-Cons every month of the year.  So right now, yes it does seem overbuilt. 

PENNER:  Okay, well thank you very much Laurie Weisberg.

WEISBERG: Thanks.