MIAMI – Like many home owners, hotels are starting to drown in debt.
They have been enticing travelers all year with sweet deals: credits for in-house spas and restaurants, up to 50 percent off five-star rooms, even free nights.
But all that discounting hasn’t stopped occupancy from dropping an average of 10 percent. The result? Hotel loans have begun falling into delinquency faster than any other kind of commercial real estate debt.
The rising defaults paint a grim picture for an industry with increasingly more rooms than guests, and more hotels still opening every day. It’s a problem that could get worse before it gets better, with demand expected to remain weak and ambitious new projects planned before the meltdown worsening the room glut.
The oversupply means room rates should stay low for at least another year, good news for consumers but not so great for hotel owners and the banks that lent them the cash to build or buy.
The rise in delinquencies is sharp. Five times more hotel loans are behind on payments this year than in 2008, according to mortgage data firm Trepp LLC, which tracks those traded by investors. In October, 8.7 percent were distressed, compared with 1.5 percent last year.
That’s almost double the 4.8 percent rate for commercial property and the 4.5 percent rate for stores.
that’s correct, the next wave of foreclosures will be in the commercial real estate.
I hope there isn’t a bailout, these people have been exploiting the average american for years. I don’t feel sorry for any Hotel that charges its customers extensively more in "tourist" traps than they do every where else. they were paid extremely well for their lack of customer service and they should have planned for this.
Without hotels the business man can’t travel
Without business travel, the economy shrinks
The answer is, maybe they will get some massive tax relief, but a Detroit bailout, I doubt it.
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Sure, why not add them to the socialist takeovers? We already have govt owned car companies, banks, insurance companies, soon to be health care industry .. . a few good hotels (used to be anyway, til govt takeover) would fit right in.