“The commercial lodging property segment, which faced unprecedented challenges and headwinds during the pandemic due to declines in tourism and business travel, has shown signs of an improvement in prospects as vaccination progress and economic reopening continue to pick up,” wrote Maximillian Nelson. a research analyst at Trepp.
“According to CBRE, hotel occupancy fell by 44 percent in December 2020 and room turnover by 56.3 percent since the beginning of the year. The report found that hotels saw an average decrease in gross operating profit (GOP) of 78 percent, resulting in the lowest GOP margin in 82 years.
“Trepp data shows that more than 3,100 commercial mortgage backed securities (CMBS) loans totaling over $ 89 billion are secured by US hotel properties. The lodging sector is the third largest property type with an outstanding balance and accounts for 15.8 percent of the CMBS universe.
“In February, the lodging sector saw the largest monthly crime rate decline since October 2020, similar to the recent downward trend in the overall crime rate, which fell 272 basis points to 16.38 percent. The fall in the February rate was concentrated on the subtypes “other” and “full-service real estate”, which fell by 7.05 percent and 1.69 percent, respectively. In March, the overall accommodation rate fell another 41 basis points to 15.95 percent.
“The long-stay subtype, a single bright spot, continued to see lower crime rates – it was 7.31 percent in March. This was recently reflected in the market when Blackstone and Starwood Capital Group acquired Extended Stay America Inc. for $ 6 billion. The move reinforces the subtype’s stronger performance compared to other lodging segments as these hotels are designed for longer stays and mark them as economically resilient alternatives to short-term options, but more flexible than leasing an apartment. The special service quota in the accommodation sector also fell slightly in March to 24.25 percent. The rate is still the highest among the commonly recorded commercial property subtypes, with the highest concentration in the full service, limited service and “other” subtypes, with the special service rates all over 20 percent.
“Although arrears for accommodations are declining overall, the special service rates for some of the largest metropolitan areas in the United States remain elevated. Since October, the special rate for hotel services in Portland, Oregon and the Houston metropolitan areas has been over 70 percent, while the value for New York has risen 8.4 percent to 53.08 percent. The high crime rate and special service rates in Portland, Houston and New York are largely due to decommissioning orders and a lower level of tourism. At the micro level, Houston has suffered from the lack of business travel, leaving empty, usually busy convention centers and conference rooms. New York City and Portland, on the other hand, have suffered from major tourist shutdowns in the city and tighter economic closings, resulting in generally low occupancy and reservations for their hotels. “