Abstract
The hotel industry seems to be recovering from its recent abyss, but the financial damage to many properties from many months of decline will continue for some time. In particular, the hotel industry faces the prospect of heavily leveraged properties submerged by delinquencies and defaults. An analysis of debt coverage ratios for 365 hotel properties with commercial mortgage-backed security loans shows considerable deterioration from 2008 to a nadir in 2010. Starting in 2011, net operating income and debt coverage ratios should gradually improve, with noticeable improvement in 2012.
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References
1.
See, for example, Pewter Eavis, "Lenders Open to Real-Estate Pain," Wall Street Journal, April 10, 2010. The first sentence in this article is, "A slow motion train wreck is still a train wreck."
2.
See "US Hotel Loan Default Rate May Double by 2010-Fitch," Reuters, March 22, 2010.