Media Coverage
Media Coverage
Press Contacts: Erik Cummins, Matt Hyams, Olivia Thomas
05.31.23
Amidst the difficult debt market, financing on many hotel properties has or will come due in the next year or so. As such, distressed hotel properties that were already facing a weak financial status—even before the pandemic—are now being confronted with bankruptcies, foreclosures and out-of-court restructurings.
While the hotel market is recovering rather well from COVID-19’s impact, the pandemic, inflation and high interest rates have exposed troubled hotel properties and have shortened the patience of lenders in allowing borrowers to slide on their loans, according to a report by Trepp.
“Those two triggers have exposed the weaker players in the market and have caused the lenders to exercise on those weaker players,” Litigation special counsel Anthony Cavanaugh told Law360.
Insolvency & Restructuring partner Patrick Fitzmaurice added: “You have a situation where lenders who have been patient for a long time and don't really want to foreclose think they don't have any other choice. Any lender who got sideways with a borrower [before the pandemic] could always refinance into another loan and the payments would basically be the same because rates were so low for so long. That's not the case anymore.”
“Absent some market effect like another pandemic, I see the hotel market remaining static because folks are concerned about the economy right now, and if the economy dips further into a recession, the hotel market will be one of the first markets to be affected,” Cavanaugh said. “Hospitality is really tied to economic upturns and downturns. When folks start saving money and businesses start looking to save money, travel is one of the first things that gets cut.”
Fitzmaurice took a more pessimistic view, adding that air travel and hospitality “will be the first things on the list for belt tightening” if interest rates stay high and the economy tips into recession.
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