HOTEL REVENUES IN BANKRUPTCY: AN ANALYSIS AND ANALYTIC FRAMEWORK

The rents versus accounts controversy has undoubtedly contributed to an already depressed hotel financing market. Conflicting decisions, leading to dramatically different outcomes, foster uncertainty which interferes with the efficient operation of markets. The majority view decisions are flawed because they fail to grasp the underlying nature of a hotel. The majority courts allowed themselves to become distracted by superficially attractive distinctions, which have led to unexpected and unwelcomed results. From a policy standpoint, the minority position does not unnecessarily impede the borrower's operation of the property, while the majority position leaves the lender without any leverage. Under the minority view, the parties are always free to define more narrowly the scope of the lender's security interest, post-petition, regardless of the parties' mutual intent that it continue. For misguided reasons, security interests in hotels are analyzed differently when the borrower is involved in a bankruptcy proceeding.