New York City’s hotel crisis – with occupancy rates languishing at 20 percent below last year and a growing number of inns closing permanently – is making investors nervous about the $4 billion in hotel mortgages that have been packaged into securities backed by commercial mortgages.
More than four out of five hotels included in the bundles are approaching a financial breaking point, analysts told the Financial Times.
Among all hotels in the bundles, 37.7 percent are named on a watch list that warns investors the hotels’ mortgages may soon be turned over to debt collectors known as “special servicers,” according to Trepp, an analysis firm.
Another 44.7 percent of the loans are already in the hands of special servicers helping them either to find a way to pay their mortgages, work out terms with their lenders, or prepare for foreclosures.
In total, 82 percent of New York City’s hotel mortgages backing securities are troubled, compared with a national average of 71 percent, according to Trepp’s data.
New York hotels’ troubles have been made worse by years of overbuilding, resulting in a glut of hotels and hotel rooms, analysts say.
If only half of the City’s 640 hotels close for good, that will be a “great” outcome, Vijay Dandapani, CEO of the Hotel Association of New York City, told the NYT.
The winter holiday season usually fills the City’s inns with shoppers and sightseers. With the virus rampant and travel all but shut down, “it’s now going to be a very dark time” for New York hotels, Dandapani said.
TREND FORECAST: With new lockdown orders, stay-at-home mandates, and numerous travel restrictions imposed on the public by governments, holiday traffic and tourism will continue to decline, putting more downward pressure on the faltering hotel/hospitality industry.
