Hotel Industry Decimated By Pandemic, Faces Potential ‘Historic Wave Of Foreclosures’

As travel demand stalled during the pandemic, the hotel industry faces what could be “a historic wave of foreclosures,” the American Hotel & Lodging Association said.

The association cited the number of delinquencies, saying it is the most heavily hit sector of the commercial mortgage-backed securities market. As many as one in every four hotels backed by a commercial mortgage-backed securities loan is delinquent on payments, a report compiled by data research firm Trepp showed.

Of these hotels, the report said, that 23.4% of loans were 30 or more days delinquent as of July, which the association said is the highest percentage on record. At the end of 2019, that percentage was only 1.3%. This accounts for $20.56 billion in commercial mortgage-backed securities loans, up from $1.15 billion as of December 2019, according to Trepp.

The percentage of loans that are delinquent during the pandemic is greater than those that were delinquent during the Great Financial Crisis, exceeding that time period by 53%, the report indicated.

In response, 4,000 hotel industry leaders have sent an “urgent letter” to Congress requesting immediate action to help hotels avoid foreclosure, which would lead to the loss of tens of thousands of jobs. The hotel industry is urging Congress to enact the HOPE Act to provide assistance to small businesses that are suffering in the 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,” Chip Rogers, President and CEO of the American Hotel & Lodging Association, said in a statement.

“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 strongly supports the HOPE Act to give struggling small business hotels an opportunity to keep their doors open and avoid foreclosure. We urge the immediate passage of this legislation so America’s tourism industry can survive and recover when the public health crisis subsides.”

Under the HOPE Act, the hotel industry would receive temporary liquidity to keep their doors open in exchange for an equity interest in their properties. No new funding would need to be appropriated as the relief could come from existing appropriations from the CARES Act.

“The economic fallout from the COVID-19 pandemic is decimating the travel and tourism sector - especially small businesses like hotels,” Cecil Staton, President and CEO of Asian American Hotel Owners Association, said in a statement.

“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.

“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. 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.”