BY JAMES FINK
Business First

Owing nearly $7 million to the Royal Bank of Canada, the Holiday Inn Resort & Conference Center on Grand Island has been placed in the hands of a court-appointed receiver.

However, the 263-room hotel - the largest on Grand Island - remains open and will be operating under the premise of "business as usual," said Buffalo attorney R. Michael Sawicki, who was appointed receiver by state Supreme Court Justice Hon. Kevin Dillon.

"It is open and operating, and I expect it to continue that way," said Sawicki.

The legal action was brought by the hotel's mortgage holder, Royal Bank of Canada, which is owed $6.9 million, according to documents filed in state Supreme Court and the Erie County clerk's office.

Royal Bank of Canada assumed the hotel's mortgage in September 2007. The bank declined comment on the legal action.

The hotel was acquired by American Hospitality Group LLC in September 2004. American Hospitality paid $3.5 million for the property, but a series of gap-financing packages that covered renovations increased the mortgage to $6.25 million, according to court documents. The $6.9 million includes the mortgage, interest, legal costs and other associated fees.

Like most of the area's hotels, the Grand Island Holiday Inn has been hurt by a regional drop in tourism, which began more than one year ago.

According to Smith Travel Research, hotel occupancy in Erie County was off 8.1 percent in February and down 6.8 percent for the first two months of the year.

Last year, hotel occupancy in Erie County was off 7.2 percent, while the average daily room rate fell 2.8 percent, dropping from $89.61 per hotel room to $87.09 per hotel room.

Sawicki said it is too early to determine whether the hotel will be sold or if a workout plan can be negotiated between American Hospitality and Royal Bank of Canada.

"A lot of things can happen," he said. "It is in everyone's best interest to keep the hotel open, and we'll take it from there."