Coronavirus could expose US hotel owners with high debt

National hotel industry had close to $300B debt as of September, up 7.8% from a year earlier

TRD MIAMI /
Mar.March 11, 2020 11:30 AM
Coronavirus could hurt the US hotel industry, which had $300 billion in debt as of September. (Credit: iStock)

Coronavirus could hurt the US hotel industry, which had $300 billion in debt as of September. (Credit: iStock)

Hotel owners who seized on low interest rates and took on big loans are facing greater exposure as the coronavirus pandemic puts a dark cloud over the industry.

At the end of the third quarter of 2019, the U.S. hotel industry had $300 billion of mortgage debt, the Wall Street Journal reported. That figure is a 7.8 percent jump from the same time in 2018, and 14.2 percent in 2017.

Citing data from real estate-debt analytics firm Trepp, the outlet reported that New York, Los Angeles and Las Vegas hotel markets are especially exposed. In New York, at least 21 mortgages backed by hotels were reportedly on a watch list for potential default as of February.

While some hotel owners dismissed the significance of the outbreak, some figures show that the industry was on shaky ground even before the virus started spreading. At the end of the third quarter of last year, 1.33 percent of the hotel loans made by banks were delinquent, according to the Trepp data.

The hotel industry has been on notice since the coronavirus outbreak began in China at the end of last year. The virus has disrupted global travel and forced conferences to be cancelled, impacting hotel vacancy rates. This month, Moody’s Analytics estimated the U.S. hotel industry could see a 50 percent drop in foreign visitors because of the coronavirus.
[WSJ] — David Jeans


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