"We have seen borrowers ready to throw in the keys," says Butler. "Through analysis work--we have been able to on the borrower side--to create enough value to give the lender enough incentive to give something to the borrower."

Incentives are key says Westergom. "The borrower can't show up to the table with the same plan they [started] with," he says. "You can't expect the lender to know the specifics of the market. You need to help them become familiar with them. You need to help them understand the market drivers."

Certain Deals Still Get Done

In other hotel finance news, sources in the following panel, "What's Happening in Capital Markets? Are any Deals Getting Done? Where and How?" said that there are certain deals getting done in this environment. "There is activity," said moderator Michael Cahill of HREC Investment Advisors, "but on the other side, there have also been deals we have not been able to close."

Panelists on the session included: David Schachter of Reedland Capital Partners; Marty Collins of Gatehouse Capital; Neil Freeman of Aries Capital LLC; Henry Vickers of AEW Capital Management; Kevin Donahue of Midland Loan Services Inc.; and Abid Gilani of Marriott International Inc.

"We are working on a loan workout involved in the capital markets," said Schachter. He continues that his company is working with a hotel owner in the Bay Area that have a $25 million loan that is in default and his company is bringing in a private equity source that together with his firm and the borrower, are bringing in a discount. "In doing so, the hotel owner will live to see another day."

Schachter mentioned another scenario where his company has a new hotel construction loan it is working on. "There are a number of large global banks that are still making construction loans," he said. "We are working with a handful of lenders around the country that are doing these types of loans." He added that it is not easy to get construction loans done, but he said that "the good news is if you have a strong enough developer and they are looking for under $20 million, it can get done."

Midland's Donahue explains that there are opportunities, and Midland is considering note sales, but it is "really trying to simply preserve debt of what we have." He added that "I think everyone is scrambling for answers. We are more willing to listen to borrowers. We encourage creativity and we try to be flexible but they have to be adding something to the solution."

Marriott is also seeking opportunities, explained Gilani, but mostly conversion opportunities in markets where the company does not yet have a presence.

Collins explained that "the idea of people getting funds to develop from the ground up is so over. It is over perhaps for the next half decade." He did add that although there are always exceptions to this, "developers need to redefine themselves."