A report has emerged claiming that a quarter of US hotels can’t pay their mortgage due to the COVID-initiated collapse of the tourism industry.
In a report submitted to the US Congress, the American Hotel and Lodging Association warned lawmakers that the industry faces a potentially devastating series of defaults without government assistance.
Numbers cited in the report show that 23.4% of current hotel loans were late by 30-days or more, compared to just 1.3% at the tail-end of 2019.
Chip Rogers, CEO of the American Hotel & Lodging Association has said that “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.”
Rogers added that “tens of thousands” of direct and associated jobs are at risk of being lost.
The American Hotel & Lodging Association cited data from the Bureau of Labor Statistics estimating that as many as five million jobs have been lost since Feburary, adding that the impact of the COVID-19 pandemic has been “nine times greater” than September 11’s impact on the tourism industry.
“The reality is, for the hotel industry – which was the first to be hurt by this pandemic – it will be the last to come out.” David Kong, President & CEO of Best Western
Marriott International issued a statement in May saying that the COVID-19 pandemic is “having a more severe and sustained financial impact on Marriott’s businesses than 9/11 and the 2008 financial crisis combined.”
This was echoed by the IHG Group who said its Q2 revenue had dropped by more than 50%.
According to a report from CNN Business “in total, $20.6 billion in hotel commercial mortgage-backed security loans were 30 or more days delinquent as of July. For comparison, the highest volume of delinquent hotel leans during the financial crisis more than a decade ago was $13.5 billion.”
More than 4,000 hotel owners, as well as trade groups and industry bodies have signed an open letter submitted to Congress, asking to be included in the Helping Open Properties Endeavor (HOPE) Act.
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“The HOPE Act would allow business owners to keep their businesses running and retain and rehire our valued employees,” the letter reads. “Without action, an unprecedented wave of hotel foreclosures will ripple out from the commercial real estate market causing permanent job losses for thousands and the loss of billions in tax revenue to local municipalities supported by hotels.”
Speaking with CNN Business, President & CEO of Best Western Hotels & Resorts, David Kong has said that “
In reference to the Trump administration’s $350 billion Paycheck Protection Program (PPP), Kong said that “the PPP was a much-needed band aid for the problem, but the reality is it’s only eight weeks of relief, and if you think about how long the recovery is going to be, it’s going to take much, much longer than that. The best thing that the government can do is provide some flexibility, and also extend the coverage period to provide much-needed funding.”
“The reality is, for the hotel industry – which was the first to be hurt by this pandemic – it will be the last to come out, and the hotel industry is very different to other small businesses… the loan structure is very different