One in Five U.S. Hotel May Default on Their Loans by the End of 2010

Hotel operators continue to bleed as consumers and businesses keep cutting back on travel. What’s even more problematic, besides defaults and delinquencies that have begun to uptick in the securitized pool, is that hotels are bracing for more loan defaults. These two stress producing elements are further deteriorating any chance of some sort of stabilization in the industry.

From Bloomberg:

As many as one in five U.S. hotel may default on their loans by the end of 2010 as the recession forces companies to spend less on travel and perks, according to Kenneth Rosen, an economist at the University of California.

The value of hotel properties in default or foreclosure almost doubled to $17.3 billion in the second quarter through June 24 from $9 billion at the end of the first quarter, data compiled by Real Capital Analytics Inc. show. The New York-based research firm… expects hotel defaults to increase by as much as $2 billion next quarter, said analyst Jessica Ruderman.

“Hotels without question will have the highest foreclosure rate of any commercial real-estate sector,” said Rosen..
…
The recession has led to a “cancel everything kind of attitude” for business travel, said Vasant Prabhu, Starwood’s chief financial officer, at a June 1 Goldman Sachs lodging and gaming conference…Revenue per available room, a measure of hotel rates also known as RevPAR, dropped 18 percent from January to March this year compared with 2008…

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