Hotel Recovery Reaches ‘Plateau’

The hotel sector’s recovery continues, though it has “plateaued” for the moment, analysts with STR and Trepp LLC reported.

STR, Hendersonville, Tenn., said hotel occupancy remained flat from the previous week through the week ending April 24. Occupancy equaled 57.3 percent at an average daily rate of $108.10, resulting in revenue per available room of $61.93.

“Overall industry occupancy will likely remain plateaued until the summer leisure travel boom, but there has been noticeable uptick in weekday occupancy, which is indicative of increased business travel,” STR said.

Following the recent downward trend of the overall delinquency rate, the lodging sector in February posted its largest drop in the delinquency reading since October 2020 as it fell 272 basis points to 16.38 percent, Trepp reported. The sector’s special servicing rate is also falling.

Trepp reported 1,361 loans totaling more than $22.7 billion or 52 percent of all current lodging loans have requested COVID-related forbearance. More than 47 percent ended up with some form of loan modification and two-thirds of those resulted in a forbearance agreement.

“In the face of stay-at-home orders that led to an almost total halt of tourism and severely depleted hotel occupancy, the commitment to providing financial relief and extensions, as well as the flexibility and accommodative approach by servicers, has allowed many hotel borrowers to ride through the worst parts of the coronavirus crisis,” Trepp said in a new report, The Road to Recovery for the Hard-Hit Hotel Sector: Vaccines, Stimulus & Perseverance.

But Trepp noted the sector still has a long way to go. “Widespread valuation reductions and the large balance of loans that are due to mature this year makes a quick recovery that much more pertinent,” the report said. “As the economy re-opens, it’s likely that loans belonging to full-service and ‘other’ subtypes will continue to see improvement through increased reservations and higher occupancy rates, leading to lower delinquency and special servicing rates.”

Additionally, cities such as Houston whose hotels draw customers from conventions and business travel should continue to improve as locations open and companies return to the office, Trepp said.

“With continued cooperation between borrowers and lenders, the lodging sector will hopefully be able to navigate successfully through the rest of 2021,” the report said. “Market participants believe that lodging performance will not reach pre-pandemic levels until 2023, but a strong framework set in 2021 will benefit the sector in the years to come.”