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: 44% (-33.3%),
- Average Daily Rate (ADR): $103.25 (-21.3%), and
- Revenue Per Available Room: $45.48 (-47.5%)
However, with the mass vaccination of U.S. citizens under way and with the expected surge in travel resulting from over a year of quarantines and travel bans, the hotel industry is expecting a surge in occupancy beginning this spring and accelerating into summer.
Hotel performance decline in 2020 resulted in few CMBS hotel loan closings as hotel cash flows were insufficient to meet underwriting guidelines for loan amounts requested from borrowers. Traditionally, underwritten cash flow for hotel underwriting is based on the trailing 12-months performance, which, as noted, was horrible. However, with a performance rebound in sight, CMBS lenders are looking to adjust underwriting standards to consider the trailing 3- or trailing 6-months cash flow to be able to provide larger loan amounts to hotel borrowers.
ValueXpress has completed over 400 CMBS conduit loans for hotels. As your hotel performance begins to surge post-COVID-19, please contact Michael Sneden (firstname.lastname@example.org) or Gary Unkel (email@example.com) for a free, no-obligation loan quote.