Nov. 29--With hotel occupancy rates sinking, HBE Corp. is trying to generate cash by selling hotels in its Adam's Mark chain. 

Fred Kummer, president and chief executive of Creve Coeur-based HBE, said Wednesday that he would like to sell up to five of the 24 Adam's Mark hotels. He said the terrorist attacks of Sept. 11, which have caused a slowdown in travel, spurred his decision. 

"There's no question that the events of Sept. 11 have changed the perspective," Kummer said. "We would like to raise some cash, so we're going to sell some of our hotels that don't necessarily fit into our portfolio." 

Kummer said he hired a New York real estate investment banking firm, Sonnenblick-Goldman, to help find a buyer. He declined to discuss the sale effort further. 

An industry source said Crestline Hotels & Resorts Inc. of Bethesda, Md., is in serious negotiations to buy some of the hotels. Crestline officials did not return calls. 

HBE has opened hotels in the last two years in Indianapolis; Jacksonville, Fla.; and Northbrook, Ill., a Chicago suburb. It is expanding its hotel in Daytona Beach, Fla. 

Spokesman Randy Myers declined to reveal the size of HBE's debt from its expansion efforts. 

In October, Adam's Mark laid off 20 percent of its hotel management, Myers said. "It was Adam's Mark's first chainwide reduction in work force in the company's history." 

While the attacks disrupted travel and damaged the economy, the hotel industry's troubles started long before Sept. 11. 

In the second quarter this year, occupancy rates nationwide were 4.5 percent lower than the same period a year earlier, according to Smith Travel Research, an independent research company in Henderson, Tenn. The company's president, Mark Lommano, said the weak performance in the second quarter stemmed from "slower U.S. economic growth and persistent room supply increases." 

In the third quarter, Sept. 11 helped push the industry down further, as its occupancy rate was 8 percent below that of the third quarter of 2000, Smith Travel Research said. 

Adam's Mark also has been hit by claims that it discriminated against African-Americans. Florida's attorney general filed a lawsuit charging that the hotel chain raised prices and took other unfair actions during the Black College Reunion in Daytona Beach in April 1999. Kummer has denied the claims. 

Last year, Adam's Mark agreed to pay $8 million to settle the claims, but the dispute has continued, partly because a federal judge declined to approve the settlement. 

In July, the National Association for the Advancement of Colored People announced a boycott of Adam's Mark. Two weeks later, the chain filed suit against the NAACP, asking a judge to order an end to the boycott. Adam's Mark claimed that the boycott was unjustified and was damaging the company financially. For instance, after the boycott was announced, Procter & Gamble "put on hold a piece of business worth $1.5 million," an Adam's Mark executive said in a sworn statement filed in court. 

"There's no doubt that the boycott has had some economic impact on them," Seth Berlin, an attorney for the NAACP, said Wednesday. But he said he does not know how significant that impact has been. 

Gary Andreas, a principal in the hotel and health care consulting firm Tellatin, Andreas & Short of Chesterfield, said industry sources have told him that the Daytona Beach hotel, as well as two others in Florida, are among the hotels that Adam's Mark is seeking to sell. 

Andreas also said that Adam's Mark may need to find financing soon, and that current market conditions make any hotel financing difficult. 

"Right now, it is probably easier to get blood from a turnip than it is to finance a hotel," he said. 

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(c) 2001, St. Louis Post-Dispatch. Distributed by Knight Ridder/Tribune Business News.