Facing a Historic Wave of Hotel Foreclosures, Industry Leaders Sign On to HOPE Act
With a new report showing nearly one out of every four hotel commercial mortgage-backed securities (CMBS) loans are delinquent, industry leaders continue to press Congress to enact the HOPE Act. This bipartisan piece of legislation was introduced by Representatives Van Taylor (R-Texas), Al Lawson (D-Fla.), and Andy Barr (R-Ky.) to provide assistance to small businesses operating in the commercial real estate market.
As part of the push to pass the legislation, nearly 4,000 hotel industry leaders — including those from the American Hotel & Lodging Association (AHLA), Asian American Hotel Owners Association (AAHOA), Latino Hotel Association (LHA) and National Association of Black Hotel Owners, Operators & Developers (NABHOOD) — signed an urgent letter to Congress urging immediate action to help hotels avoid foreclosure and the loss of tens of thousands of jobs.
“With record low travel demand, thousands of hotels can’t afford to pay their commercial mortgages and are facing foreclosure with the harsh reality of having to close their doors permanently,” said Chip Rogers, president and CEO of AHLA. “Tens of thousands of hotel employees will lose their jobs, and small business industries that depend on these hotels to drive local tourism and economic activity will likely face a similar fate.”
According to Rogers, the HOPE Act would address the unique challenges of hotel owners by providing the temporary liquidity needed to keep their doors open in exchange for a preferred equity interest in the property. The legislation would not require any new funding and would utilize existing appropriations from the CARES Act Economic Stabilization Fund.
“The HOPE Act is essential in helping provide hotel owners with liquidity when we need it most and will serve to help keep businesses open, thus saving local jobs,” said Andy Ingraham, president and CEO of NABHOOD.
Conducted by Trepp, the Hotel CMBS Report: An Update on Hotel Commercial Real Estate revealed that the percentage of loans 30 or more days delinquent was 23.4 percent as of July 2020 — the highest percentage on record. In contrast, the percentage of hotel loans 30 or more days delinquent at the end of 2019 was 1.3 percent.
In all, the report showed that $20.6 billion in hotel CMBS loans were 30 or more days delinquent as of July, compared to $1.15 billion as of December 2019. As a way of comparison, the highest volume of delinquent hotel loans during the Great Recession was $13.5 billion.
“Hoteliers are responsible for millions of jobs in communities across the nation, but unless Congress acts, there may not be businesses left for those workers to return to at the end of this pandemic,” said Cecil Staton, president and CEO of AAHOA. “We are optimistic that the HOPE Act will help hoteliers to address the debt crisis facing the lodging industry, and save good American jobs and small businesses.”