After closing last spring as the economy shut down, hundreds of U.S. hotels face the prospect of a weak fall and winter traveling season, leaving them without enough cash flow to continue.
Almost 24 percent of U.S. hotels’ mortgage payments are at least 30 days late, compared to 1.3 percent at this time last year, according to Trepp, a real estate analysis firm. The total amount past due is $20.6 billion.
The largest amount that fell delinquent during the Great Recession was $13.7 billion.
The economic shutdown and its aftermath are “having a more severe and sustained financial impact on [our] business than 9/11 and the 2008 financial crisis combined,” said Marriott International, the world’s largest hotel chain.
IHG, owner of Holiday Inn and other hotel chains, reported its second-quarter revenue was down more than 50 percent year on year.
New York City’s Omni Berkshire Place, a business travelers’ haven, already has shut its doors permanently. The 478-room Hilton Times Square closed earlier this month. The Embassy Suites-Midtown West was taken over by lenders after the real estate trust that owned it failed to make mandatory payments. The W New York-Downtown in the financial district is expected to close permanently next month.
A third of the city’s hotels are behind on their debt payments, according to a CNBC report, which quoted a major hotel investment bank as saying the closures are “the tip of the iceberg.”
If the New York City Council enacts a proposal that workers must be kept on the payroll after a property is sold, the industry’s situation there would become even more dire, innkeepers said.
The occupancy rate for the city’s hotels was 38.2 percent during the week ending 5 September, 56.3 below the same week last year, according to data firm STR. More than 100 New York hotels remain shuttered.
Hotels delinquent on debt and mortgage payments are “rising significantly” in Houston, Los Angeles, and other cities, CNBC reported.
Chicago’s renowned Palmer House Hotel, now owned by Hilton, was sued in August after it defaulted on its mortgage, owing more than $330 million. The lenders have asked a court to appoint a receiver for the Palmer House, which now may never reopen.
Metro areas with the highest percentages of delinquencies include Houston with 66.2 percent; Chicago at 53.8 percent; New York City, 38.7 percent; Seattle, 36.1 percent; and Austin, 35.7 percent.
U.S. hotel occupancy plunged to 22 percent in March but had rebounded to 50.1 percent in mid-August. Since then, bookings have slipped; for the week ended 5 September, the rate was 49.4 percent, about 19 percent lower than a year earlier, according to the hotel industry data tracking firm STR.
In July, the American Hotel & Lodging Association sent a letter, signed by 4,000 industry executives, to Congress pleading for a bailout to stave off a massive wave of bankruptcies.
The HOPE Act, which directs the U.S. Treasury to buy a portion of hotels’ mortgage debts, is pending in Congress.
TRENDPOST: Today, the American Hotel & Lodging Association survey showed that without more federal aid, 74 percent of hotels will lay off more employees: “As devastated industries wait for Congress to pass another round of COVID-19 recovery legislation… the hotel industry remains on the brink of collapse because of the pandemic. Results show 68 percent of hotels have less than half of their typical, pre-crisis staff working full time,” they reported.
Again, as we keep noting, beyond the one industry that reports their dire conditions, also being destroyed are all the related industries that service them with products and services. With tourism and travel down, beyond empty hotel rooms, businesses such as restaurants, theater, entertainment, bars, discos, etc., are, and will, continue to suffer economically.
