Since the beginning of March, the hotel industry has lost more than $40 billion in room revenue. Hotels continue to lose $400 million every day, according to STR and Tourism Economics.
The historic loss of income caused by the coronavirus pandemic is rendering hotel owners unable to pay their property mortgages.
While many have worked out payment deferments with their local and regional lenders, thousands of other owners indebted with commercial mortgage backed securities or CMBS loans have no such recourse to stave off financial ruin.
Out of the $300 billion in CMBS loans in the U.S., hotels comprise $86 billion in debt.
Trepp reports that at the end of June the overall CMBS delinquency rate was more than 10 percent. Hotel loans account for one quarter of that and most of those are in the hands of special servicers, agents who manage delinquencies on behalf of the CMBS bond holders.
Negotiating relief is not an option in the CMBS world. This means thousands of hotels may soon go into mortgage default and the industry may experience a record level of foreclosures this year.
In this episode of Lodging Leaders podcast, we update the status of the hotel industry’s efforts to come up with a rescue plan for CMBS debtors. We talk to Ash Patel, CEO of Southwest Hospitality Management who is a partner in a new venture to manage distressed hotels. Also featured are Vimal Patel of Q Hotels in Louisiana who has two properties financed with CMBS loans, and Girish Patel, principal and managing director at NewGen Worldwide, and Kyle Walker, CEO at NewGen, who are among those in the industry actively lobbying Congress for a solution to the CMBS puzzle.
Resources and Links
Bijal Patel, 31, is CEO of Coast Redwood Hospitality and the youngest chair of the California Hotel & Lodging Association. He’s made even more history at CHLA by agreeing to serve an unprecedented second term as the lodging industry emerges from the coronavirus pandemic. Patel is a third-generation hotelier. Being so steeped in hospitality at such a young age is not new for members of the Indian American hotelier community, but Patel fears the pandemic has drained the industry of emerging talent. Lodging Leaders spotlights Patel, who represents a leadership demographic that is fighting for the life of the hospitality industry as they watch their peers veer toward other career paths.
Many hotels these days have made room for guests with disabilities. Hotel managers and staff should also know what the Americans with Disabilities Act says about accommodating guests with pets. During the pandemic lockdowns, a lot of people added a pet to their household and now they’re bringing Fido along on vacation. Hotel employees need to know how to cater to both consumers who are pet owners as well as guests who travel with a trained service animal. Episode 329 of Lodging Leaders podcast reports on how the ADA defines a service animal and how a hotel is legally obligated to serve a guest who comes with a dog or any other animal.