Back in the 1980s, the New York Palace Hotel (then known as the Helmsley Palace) was the home of the Queen of Mean, the truly despicable Leona Helmsley. It seems as though some of her meanness still lurks in the hallways of the 893-room luxury property in Manhattan. According to a story in today’s New York Daily News, the hotel’s managing director got fired on Monday for ordering a Catholic employee to remove the ashes from his forehead on Ash Wednesday. The story quotes the manager, Niklaus Leuenberger as telling the employee, “Wipe that f—–g s–t off your face.”
The incident drips with both disgust and irony. Disgust, of course, that a hotel manager (or any executive) would be so stupid and insensitive to make such a remark. Irony, on the other hand, comes from the property’s history, as those were the kind of remarks Leona was known for during her reign as head of Helmsley Hotels before she was sent to prison for 19 months for tax evasion. (She died in 2007.) I interviewed her several times at the hotel, and both times she interrupted the interview to scold some underling for a petty offense. Part of it was her inherent meanness. The rest was her showing a reporter that she was a tough broad. Like I was impressed. Hah!
Further irony comes from the fact that the hotel leases its land from the Catholic Church and is located across the street from St. Patrick’s Cathedral.
I assume, of course, this is an isolated case and other managers wouldn’t be so ignorant or callous to make similar remarks mocking someone’s religion. I hope we’re past that as a society and an industry.

As the recession deepens and lingers, and the hospitality industry continues to suffer disproportionately to other segments of the economy, we’re bound to see a growing number of bankruptcies in the coming months among hotel companies of all sizes.

Not surprisingly, one of the first is a Las Vegas operator, Herbst Gaming, which cashed in its chips this past Sunday through a prepackaged Chapter 11 filing. The company, which operates 15 casinos in Nevada, Iowa and Missouri, came to terms with its creditors over $847 million in debt. The company’s casinos stay open under the plan.

More alarming is news that MGM Mirage is facing default on $7 billion in loans and the mounting concern over the company’s ability to complete the $9.1-billion CityCenter project that’s in the home stretch and due to open in December. Its joint-venture partner in that Strip project that combines hotels, casinos, residential and retail filed suit on Monday to be “relieved” on its obligations in the project. Infinity World, a subsidiary of Dubai World, says MGM breached its joint-venture agreement when it declared in a recent SEC filing that there is “substantial doubt” about its ability to continue as a going concern. That’s a very dire scenario, one that MGM will undoubtedly have a tough time overcoming.

The company is not without options, however. One is to sell off some of its assets, a process that already started with the recent agreement to sell Treasure Island, one of its 10 Strip properties, for $775 million to Phil Ruffin, former owner of the Frontier. Analysts believe the company may also try to sell some vacant Strip land it owns or even a piece of the CityCenter project. Total failure of MGM Mirage would strike a serious blow to the reputation of other casino-hotel companies and all of Las Vegas.

A similar story is brewing in the traditional hotel segment. Atlanta-based Lodgian, owner and operator of 40 branded properties, is facing a $128-million loan that’s coming due in July. Lodgian also admitted in a recent SEC filing that doubts exist about its ability to continue operating.

Unless there’s a rapid turnaround in the health of the economy, these three examples are probably the tip of the iceberg. I’m guessing that at least a few household-name companies are in similar pickles and are scrambling to meet their debt obligations or to rework loan terms. Beyond that, there may be scores or more of mid-size or smaller owner and/or operator companies that may wind up in bankruptcy court this year or next.

And while this kind of news isn’t good for the industry as a whole—and, of course, these companies in particular—it also creates numerous opportunities for well-capitalized companies, funds and individuals looking to do some bargain hunting.

No matter what, the hotel industry landscape will look completely different this time next year.