This is what did them in, it seems. They'd had a good run, and borrowed money to build the largest motel they could. From the court ruling:

A six-story, 129-room motel known as La Concha was thereafter constructed, and it commenced operations in June 1959. Shortly thereafter financial difficulties arose in the operation of the motel, and the debtor instituted these reorganization proceedings on September 27, 1960. The landlord then filed with the referee in bankruptcy a petition for permission to take possession of the property.

And . . .

The motel ran into difficulty right from the beginning. The work was not completely finished in June 1959, when the motel opened. Leaks developed in the building and various other defects occurred. Management was not the best and it is evident that much man power was wasted.