ValueXpress predicts strong demand for CMBS loans in 2022 based on pent-up financing needs from the pandemic, loan maturities and a return to rent growth from inflation. ValueXpress believes CMBS loans for hotels will outpace other asset classes for CMBS conduit loans. Hotels have been essentially shut out from CMBS conduit loans in 2021, but that is about to change.
Hotels were devastated by COVID-19. In March 2021, we reported here that “The COVID-19 pandemic has affected hotels more than other asset classes eligible for CMBS conduit loans. In January 2021, the U.S. hotel industry reported all-time lows in occupancy and revenue per available room (RevPAR), according to yearend 2020 data from STR. In addition, year-over-year declines were the worst on record across the three key performance metrics, occupancy (down 33.3%), ADR (down 21.3%) and RevPAR (down 47.5%).”
But in October 2021, STR reported that RevPAR is down only 7.6% from pre-pandemic levels. Softness is limited to corporate and convention hotels, as leisure hotels are operating above pre-pandemic levels. In the next few months, once trailing 12-month operating history for hotels moves past COVID-19, hotel underwriting will allow for larger loan amounts, enabling hotel borrowers to achieve required loan proceeds to close.