WASHINGTON–A new national report has found the hotel industry is facing a “historic wave of foreclosures” as the COVID-19 pandemic continues to especially take a toll on small business hotel owners and its workforce.
Since the beginning of the pandemic the hotel segment has faced a historic number of delinquencies and is the most heavily hit sector of the commercial mortgage-backed securities (CMBS) market. Nearly 4,000 hotel industry leaders sent an urgent letter to Congress urging immediate action to help hotels avoid foreclosure and the loss of tens of thousands of jobs, the report notes.
The report, compiled by Trepp, shows that the percentage of loans that is 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%.
The report shows that $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. The highest volume of delinquent hotel loans during the Great Financial Crisis was $13.5 billion. The current percentage of loans that are delinquent now exceeds the highest level during the Great Financial Crisis by 53%, Trepp stated.
Support for Bill
Nearly 4,000 hotel industry leaders recently sent a letter to Congress urging it to swiftly enact the HOPE Act, which is intended to provide assistance to small businesses that operate in the ailing commercial real estate market.
“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. 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,” said Chip Rogers, President and CEO of the American Hotel & Lodging Association (AHLA).
Rogers said the HOPE Act would address the unique challenges of commercial real estate. It 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.