Thursday, October 1, 2020
Hotel industry leaders are calling on Congress to pass bipartisan legislation to assist the commercial real estate industry, as a new report predicts a historic number of hotel foreclosures due to the COVID-19 pandemic.
A new national report compiled by Trepp shows that 23.4 percent of hotel loans are delinquent by at least 30 days as of July 2020, “the highest percentage on record.” That’s compared to the 1.34 percent of loans delinquent by 30 days or more at the end of 2019.
And $20.6 billing in hotel commercial mortgage-backed securities loans were 30 or more days delinquent as of July, compared to $1.15 billion in December 2019.
Those numbers are eclipsing statistics reached during the great financial crisis of 2007 and 2008, when delinquent hotel loans reached $13.5 billion. Trepp found that the current percentage of delinquent loans are 53 percent higher than the peak reached during the prior crisis.
The report also says that 24 percent of loans and $21 billion in hotel CMBS loans are with the special servicer as of last month, compared to 1.81 percent of loans at the end of last year and $1.6 billion in the CMBS loans in December 2019
“The highest volume of loans in special servicing during the Great Financial Crisis was $17.6 billion. That peak did not come until about two years after the beginning of the GFC,” the Trepp report states.
The hospitality industry has been hit hard by restrictions adopted to curb the spread of COVID-19, with many Americans cancelling planned trips or otherwise choosing not to travel.
The grim metrics for the industry comes as hotel leaders push for congressional relief for their industry. In a letter sent Tuesday, groups like the American Hotel & Lodging Association and the National Association of Black Hotel Owners, Operators and Developers urged lawmakers to pass the Helping Open Properties Endeavor (HOPE) Act, bipartisan legislation aimed at preventing commercial real estate foreclosures.
The letter signed by nearly 4,000 hotel industry leaders, says that on top of “support for individuals impacted by the COVID-19 health crisis, there is an urgent need for commercial debt relief to prevent a further economic crisis.”
“The HOPE Act would allow business owners to keep their businesses running and retain and rehire our valued employees. Without action, an unprecedented wave of hotel foreclosures will ripple out from the commercial real estate market causing permanent job losses for thousands and the loss of billions in tax revenue to local municipalities supported by hotels,” the letter reads.