Even if a default were to occur, the Hyatt "would remain open and operating as we have for the last 13 years," Brennan said. "We know from historical operation that there's enough business out there in normal market conditions to satisfy all the obligations. Once we get back to normal market conditions, we'll be fine."
Timing finally may be on the resort's side, with economic conditions improving for the hospitality industry, said Jan D. Freitag , a senior vice president with Smith Travel Research.
"Things are definitely getting better overall for the nation," Freitag said. "We have healthy demand growth, selling more rooms than ever before, but not a lot of new hotels are being built, so occupancy [rates] are increasing."
Resort hotels in particular are benefiting, he said. Resort property occupancies grew more than 2 percent in the first four months of the year, to 64.7 percent. Average room rates increased 5.7 percent.
"That's fairly healthy," Freitag said, and those trends are likely to continue this year.
The Hyatt Chesapeake is not the first government-owned hotel in Maryland to run into financial difficulty.
The state poured millions of dollars into the money-losing Rocky Gap hotel and conference center in Western Maryland before turning the project over to a private company last year. Evitts Resort LLC has remade the lakeside golf resort as a casino, which opened in late May.
And in Baltimore, city officials were forced to dip into the general fund for $1 million to help the city-owned Hilton Baltimore Convention Center Hotel make its debt payments this year.
O'Brien wondered whether the Hyatt Chesapeake also might need to be sold or turn to gambling, which would require approval of state lawmakers. He said bondholders can form a protective committee and negotiate with MEDCO about restructuring the debt or selling the hotel.
"There's no quick fix here that I see," O'Brien said. "It appears to me that the long-term answer needs to be some other revenue source, and that smells to me like it's gambling. ... In the Eastern Shore parlance, it's time to fish or cut bait. The issues need to be dealt with because they're not going to go away."
Brennan said MEDCO is not considering selling the hotel.