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
The coronavirus pandemic is forcing hoteliers to deploy new technology to run more cost-efficient businesses and to ensure customers that properties are safe by providing such services as contactless check in and mobile key. Long Live Lodging explores how the COVID-19 outbreak has invigorated hotels’ adoption of tech solutions and looks at what types of products owners and operators are investing in during the coronavirus crisis and for the post-pandemic era. This report is part of Long Live Lodging’s ongoing coverage of the coronavirus crisis and its impact on the hospitality industry.
Hotel appraisers and brokers expect distressed assets to come to market as the pandemic recession continues into 2021. Analysts say billions of dollars in private equity are waiting in the wings to acquire hotels underperforming as a result of the coronavirus crisis. But pricing will be different than in previous economic downturns. While a transaction may be distressed, it will not necessarily reflect distress pricing,” said Daniel Lesser of LW Hospitality Advisors. Long Live Lodging explores the state of hotel values as well as what may lie ahead with regard to transactions in 2021 as the spread of COVID-19 continues to stifle lodging performance. This report is part of our ongoing coverage of the coronavirus crisis and its impact on the hospitality industry.