A report compiled by data and analytics provider Trepp shows what many in the MICE industry already know: The hotel industry has been hit hard by the coronavirus pandemic.
But this most recent data unearths something even more devastating. According to the report, the hotel industry is facing a historic number of delinquencies and is the most heavily hit sector of the commercial mortgage-backed securities (CMBS) market. Trepp’s report shows that the percentage of hotel loans that is 30 or more days delinquent is 23.4% as of the end of July—“the highest percentage on record,” according to a press release from the American Hotel & Lodging Association (AHLA).
At the end of 2019, for comparison, the percentage of hotel loans that were 30 or more days delinquent was only 1.3%.
Trepp’s data shows that $20.6 billion in hotel CMBS loans were 30 or more days delinquent as of the end of July. That number exceeds the highest volume of delinquent hotel loans during the 2007-2008 financial crisis, which was $13.5 billion.
[Related: AHLA President & CEO on Safe Stay and What Planners Need to Know Now About Hotel Industry]
“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 AHLA, in a press release. “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.”
A Call for Immediate Action
On August 18, nearly 4,000 hotel industry leaders, including Rogers, sent a letter to Congress calling for immediate action to help hotels avoid foreclosures and the loss of jobs. They also implored Congress to enact the HOPE Act to provide assistance to small businesses that operate in the commercial real estate market.
In AHLA’s press release, Rogers said the legislation “would provide commercial property owners the temporary liquidity they need to keep their doors open in exchange for a preferred equity interest in the property.” He added that the HOPE Act would not require any new funding and would use existing appropriations from the CARES Act Economic Stabilization Fund.
“Hoteliers are responsible for millions of jobs in communities across the nation, but unless Congress acts, there may not be businesses left for those workers to return to at the end of this pandemic,” said Cecil Staton, president and CEO of the Asian American Hotel Owners Association. “We are optimistic that the HOPE Act will help hoteliers to address the debt crisis facing the lodging industry, and save good American jobs and small businesses.”
You can read the full letter here.
Read Next: CVBs Enter Triage Mode in the Wake of COVID-19 Staff Reductions
