Here are the markets where hotels are hurting the most

Trepp data shows impact of Covid-19 has been uneven across US and by hotel type

National Insights /
Nov.November 20, 2020 08:00 AM
Hotels in trouble: the Hilton Houston Post Oak (left) saw its value cut in half and is in foreclosure, and the Residence Inn Arlington Pentagon City is set to be torn down and turned into part of Amazon’s HQ2. (Photos via Hilton; Marriott; iStock)

Hotels in trouble: the Hilton Houston Post Oak (left) saw its value cut in half and is in foreclosure, and the Residence Inn Arlington Pentagon City is set to be torn down and turned into part of Amazon’s HQ2. (Photos via Hilton; Marriott; iStock)

Nearly $31 billion in outstanding CMBS hotel loans — more than a third of the total — is due to mature in 2021.

That’s according to a new report from Trepp, which found that 3,100 hotel loans totaled $87 billion, about 16 percent of the total outstanding balance of all CMBS loans.

Lodging properties have been one of the hardest hit property types alongside retail, and though recent news about vaccine development appears promising, the nationwide surge in coronavirus cases and approaching winter months still present headwinds in the short term.

“Major players in the hotel segment have been forced to reassess the value of their properties and have shown an increasing willingness to give up ownership,” according to the Trepp report, pointing to Monty Bennett’s Ashford Hospitality Trust as a prime example. The hotel REIT has been selling off assets in recent months and has expressed readiness to hand delinquent properties back to its lenders.

The impact of Covid-19 on hotels has been geographically uneven, as the chart below shows. While major metros like New York, Los Angeles and Chicago all have more than a billion dollars each in delinquent loans, Miami — with more than $4.3 billion in outstanding CMBS hotel debt — only has $363 million in loans behind on payments.

In proportion to the size of its hotel market, Houston stands out as one of the most hard-hit cities with 76 percent of hotel CMBS loans facing delinquency, due to the pandemic’s impact on the oil industry. Trepp’s report notes that the cancellation of “large revenue-driving energy conferences” has had a big impact on the city’s hotels.

Hotels in Portland, Oregon, are also facing an unusually high rate of CMBS hotel loan delinquencies, accounting for 78 percent of the city’s total balance. On top of the pandemic, the city struggled with hazardous levels of wildfire smoke in the late summer, and gained nationwide notoriety for violent clashes in the wake of the summer’s Black Lives Matter protests.

Different types of hotels have also been affected differently by the pandemic, with limited-service hotels facing higher rates of delinquency than extended stay and full-service hotels. A CBRE research report cited by Trepp shows that rural and mid- to lower-tier hotels have fared better on average than their urban or upper-tier counterparts.

While the delinquency rate for hotels — and the CMBS sector overall — has come down from its summer peak as forbearance agreements have come into effect, the proportion of loans in special servicing has remained above 25 percent. Meanwhile, hotels that have been reappraised since March have on average seen their values sliced by nearly 30 percent.

“Liquidity pressures are at record highs and recovery can’t come soon enough. Values have declined and the effects of the pandemic will likely be felt for years to come,” CBRE analysts write in their report, while professing optimism that the sector will eventually rebound as it has many times in the past.






    Related Articles

    arrow_forward_ios
    HNA Group Founder Chen Feng and 181 West Madison Street (Getty, Google Maps)

    Here’s what tenants pay at HNA’s 1M sf Loop office tower

    Here’s what tenants pay at HNA’s 1M sf Loop office tower
    Aon Center (Google Maps)

    Here’s what tenants pay at 601W Cos.’ Aon Center

    Here’s what tenants pay at 601W Cos.’ Aon Center
    Brookfield’s Brian Kingston and Oakbrook Center (Credit: Brookfield)

    Here’s what tenants are paying at Brookfield’s Oakbrook Center mall

    Here’s what tenants are paying at Brookfield’s Oakbrook Center mall
    The Old Post Office (Google Maps)

    Here’s what tenants pay at 601W Cos.’ Old Post Office

    Here’s what tenants pay at 601W Cos.’ Old Post Office
    66 Orland Square with GW Properties CEO Mitch Goltz and BlitzLake Partners CEO David Blitz (Google Maps)

    Facing foreclosure, GW Properties hands over Orland Park shopping center

    Facing foreclosure, GW Properties hands over Orland Park shopping center
    Deutsche Finance America managing partner Jason Lucas and Michael Shvo, with 333 South Wabash

    What tenants are paying at Shvo and Deutsche Finance’s “Big Red” building

    What tenants are paying at Shvo and Deutsche Finance’s “Big Red” building
    Mayor Lori Lightfoot and Hotel 166, which is among the five hotels housing frontline workers and coronavirus patients through a program the city is funding. (Credit: Getty Images; Google Maps)

    City’s bill mounts for Covid-related hotel housing but many rooms sit empty

    City’s bill mounts for Covid-related hotel housing but many rooms sit empty
    Phil Denny, 240 N. Ashland (Credit: Google Maps)

    “King of the West Loop” could soon be facing a cash crunch

    “King of the West Loop” could soon be facing a cash crunch
    arrow_forward_ios

    The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

    Loading...