CEO DATELINE - Associations: Hotels facing ‘historic wave' of foreclosures
CEO DATELINE - Associations: Hotels facing ‘historic wave' of foreclosures
- August 21, 2020 |
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Walt Williams
A new report commissioned by four hotel industry associations concludes the COVID-19 pandemic could trigger an unprecedented wave of hotel foreclosures without federal aid.
The report, conducted by analytics firm Trepp, found that the percentage of commercial mortgage-backed securities loans held by hotels that are 30 or more days delinquent was 23.4% as of last month—the highest percentage on record. By comparison, the percentage of hotel loans that were 30 or more days delinquent at the end of 2019 was 1.3%.
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Roughly $20.6 billion in hotel CMBS loans were 30 or more days delinquent as of July, compared to $1.15 billion as of December 2019, according to the report. The highest volume of delinquent hotel loans during the last recession was $13.5 billion. The current percentage of loans that are delinquent now exceeds the highest level during the previous financial crisis by 53%.
"With record low travel demand, thousands of hotels can't afford to pay their commercial mortgages and are facing foreclosure with the harsh reality of having to close their doors permanently," said Chip Rogers, CEO of the American Hotel & Lodging Association. "Tens of thousands of hotel employees will lose their jobs and small business industries that depend on these hotels to drive local tourism and economic activity will likely face a similar fate."
The hotel industry is urging Congress to pass the Helping Open Properties Endeavor (HOPE) Act, which would direct the Treasury Department to provide financial assistance to borrowers of commercial mortgages that were financially harmed by the pandemic. So far the bill has made little progress.
"The economic fallout from the COVID-19 pandemic is decimating the travel and tourism sector—especially small businesses like hotels," said Cecil Staton, President and CEO of Asian American Hotel Owners Association. "That's why we need Congress to provide hotel owners with real relief that addresses the needs of small businesses with commercial real estate assets."
The Latino Hotel Association and National Association of Black Hotel Owners, Operators, and Developers also urged Congress to act, with LHA CEO Lynette Montoya saying the HOPE Act "would provide relief and could help stimulate the economic situation in communities throughout the United States."
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