Sam Nazarian is accustomed to success and fame. He operates some of Los Angeles' most popular nightspots, including such paparazzi-besieged watering holes as Area, MI-6 and Hyde Lounge. He has played himself on the cable-TV show "Entourage" and lives next door to actor Leonardo DiCaprio in Hollywood Hills.

But a foray into high-end hotels has turned into a costly slog for the 34-year-old impresario amid the worst hotel market in decades.

During...