The American Hotel and Lodging Association (AHLA) is among those warning of mass hotel foreclosures starting this fall as CMBS (commercial mortgage-backed securities) loan delinquency rates continue to rise amid the COVID-19 pandemic.
“With a sharp decline in travel demand, nine times worse than September 11 and with lower room occupancy than during the Great Depression, our small business owners are struggling to survive. The human toll on our industry has been equally as devastating,” AHLA president and CEO Chip Rogers said in a statement.
“Right now, many hotels are struggling to service their debt and keep their lights on, especially those with CMBS loans,” Rogers added. “Without action to shore up commercial debt, especially CMBS loans, the hotel industry will experience mass foreclosures and permanent job losses which will snowball into a larger commercial real estate crisis impacting other segments of the economy.”
With only about one in five U.S. hotels receiving significant debt relief from CMBS lenders, the industry is lobbying for a long-term assistance plan.
According to a recent report from Trepp, the CMBS market has seen an “unprecedented rise” in delinquencies in recent months. “With over 90 percent of remittance data reported thus far in June, the overall CMBS delinquency rate across all property types is lurking very close to the all-time high of 10.34 percent which was registered in July 2012.”
“As of recent data, it is looking like the June number will be above 10 percent—a catastrophic 8 percent increase in just the past two months,” the June 25 report reads.
New York-Newark-Jersey City; Chicago-Naperville-Elgin and Minneapolis-St. Paul-Bloomington are the top three metropolitan statistical areas by delinquent balance with a combined balance of over $10 billion, according to Trepp.
In addition to the AHLA and other trade organizations, a bipartisan group of congressional leaders has reached out to Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell to push for additional relief.
“Without a long-term relief plan in the face of an elongated crisis, CMBS borrowers could face a historic wave of foreclosures starting this fall, impacting local communities and destroying jobs for Americans across the country,” lawmakers wrote in a June 22 letter to Mnuchin and Powell.
Noting that the hotel industry’s recovery is likely to extend into 2023 and beyond, the AHLA and other hotel associations are seeking a handful of actions to allow properties access to liquidity, including the establishment of a hotel-specific commercial mortgage-backed securities market relief fund.
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