The Sheraton Keauhou Bay Resort & Spa on the Big Island is going into foreclosure after the resort's owner defaulted on its mortgage — another sign Hawaii's beleaguered tourism industry is suffering during the global recession.

Kenneth Marcus, a commissioner appointed by Circuit Court Judge Ronald Ibarra, confirmed Thursday that the hotel is due to be auctioned July 31.

Owner Koa Hotel LLC has defaulted on nearly $60 million remaining on its mortgage, interest and fines.

Marcus said the hotel intends to stay open — for the time being at least.

“;As far as the operations of the hotel, nothing is likely to change, for all outward appearances,”; Marcus said. “;In terms of the short term, it should be business as usual.”;

He couldn't say for sure what would happen to the hotel after the sale, but said it it's unlikely someone would buy the hotel and close it.

Koa Hotel is owned by the New York private-equity firm Brickman Associates.

The property's major creditor is Lehman Brothers Holdings Inc., which filed for bankruptcy last year.

The resort's business declined amid the broader drop in visitors to Hawaii since last spring. So far this year, 15 percent fewer tourists have visited the Big Island compared to the first part of 2008.

A buyer of the property would get a 521-room resort and spa on about 20 acres of land owned by Kamehameha Schools.

The resort has three restaurants and bars, retail space, a fantasy pool, a spa, a wedding chapel, a fitness center, a business center and two tennis courts.

Notice of the foreclosure sale, which Marcus said would be advertised starting tomorrow, said no minimum price has been set for the auction.

Interested bidders must register with Marcus at least five days before the auction. Potential bidders must sign a confidentiality agreement before being permitted to review some financial documents.

Marcus will take the winning bid to Ibarra's court, where further bids will be allowed. Ibarra will approve the winning bid.

According to county property tax records, Koa Hotel doesn't owe any back taxes.

Kekoa Paulsen, spokesman for Kamehameha Schools, said the leaseholders were not in default on lease payments.

Koa Hotel purchased the former Kona Surf Hotel in 2001. In 2005, the owners took out an $82 million mortgage from Lehman Brothers.

The hotel sits on an oceanfront lot, but does not have a beach.

This has long been a problem for hotel owners, said Realtor and Honolulu-based hotel broker consultant Ronald Gilligan, who was involved in earlier purchases of the property.

“;It was geographically inconvenient for long stays,”; Gilligan said.

This hotel foreclosure sale most likely won't be Hawaii's last during the economic downturn, Gilligan said.

“;This probably will be the first of several foreclosures that take place across the state over the next few years,”; he said.