Today's hotel market is thriving, competitive and bullish. It's also a day late and a dollar short, overleveraged and obsolete. In fact, how the hotel market is functioning really depends on where you are. Are you in New York City or Tahoe? San Francisco or Las Vegas? The gateway cities are wheeling and dealing, driving market rates higher and cap rates lower, in a way that resembles 2007. REITs are shouldering their way to the front of the line for trophy properties and top-of-the-line distressed product coming out of servicers. Meanwhile, physically degraded properties continue to drop flags and beg for reuse or to be put out of their misery altogether. The meat of the market is left in the middle or lower ends for savvy, capitalized investors who are willing to go farther a field to find opportunities.

"Nobody ever wants to trade in a down market," says Daniel Lesser, president and CEO of LW Hospitality Advisors. "Now that we're solidly in a rising market, end users are taking action, and you still have an enormous amount of debt that will be coming due here in the next 18 to 24 months." The question, he points out, is how much money will be available for specific deals. "There are still legacy issues that haven't been dealt with. They will expand all the asset classes in all the hotels. By no means are we done with the class A stuff . Frankly, you're going to see more of it come around now that we're in an up market and there is a clear marketplace definition of what assets are worth."

The St. Regis Hotel in Washington, DC stands out as an available distressed trophy. Having recently dodged a foreclosure auction, it is still being shopped around by Barclays Capital, which foreclosed on the $25-million mezzanine piece in early April of this year. This, after the Irish private equity firm Claret Capital purchased the luxury hotel for $170 million in 2007. Speculation has the hotel selling for possibly $90 million to $100 million.