According to a new national report compiled by analytics company Trepp, the hotel industry is facing a historic wave of foreclosures as the COVID-19 pandemic continues to devastate small business hotel owners and its workforce.
The hotel segment is facing a historic number of delinquencies and is the most heavily hit sector of the commercial mortgage-backed securities 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.
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Nearly a quarter—23.4—percent of loans are 30 or more days delinquent 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 percent.
HOPE Act
In the letter sent to Congress, nearly 4,000 hotel industry leaders implored Congress to swiftly enact the Helping Open Properties Endeavor Act, bipartisan legislation introduced by Representatives Van Taylor (R-Texas), Al Lawson (D-Fla.), and Andy Barr (R-Ky.), that 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. “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.”
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. The legislation would not require any new funding and would utilize existing appropriations from the Coronavirus Aid, Relief and Economic Security Act Act Economic Stabilization Fund.
Leaders Speak Out
Other major hotel industry leaders expressed an urgency for Congress to step up to help struggling hotel businesses before it is too late.
“The economic fallout from the COVID-19 pandemic is decimating the travel and tourism sector—especially small businesses like hotels. 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,” said Cecil Staton, president and CEO of AAHOA. “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.”
“Our hotel industry has been devastated by the effects of COVID-19. The financial assistance through the HOPE Preferred Equity lending facility would provide relief and could help stimulate the economic situation in communities throughout the United States,” said Lynette Montoya, president and CEO of the Latino Hotel Association.
“The HOPE Act is essential in helping provide hotel owners with liquidity when we need it most and will serve to help keep businesses open, thus saving local jobs,” said Andy Ingraham, president and CEO of the National Association of Black Hotel Owners, Operators and Developers.