KABANI HOTEL GROUP compiles a biweekly guide to hospitality research to help hotels navigate the financial crisis caused by the COVID-19 pandemic. One of its more recent issues provides an overview of the hotel capital market and finds they are becoming tighter but with some hopeful signs.
Kabani’s Hotel Resource Guide III, citing several sources, says the threat of delayed or defaulted payments related to the downturn is making capital markets tighter. The Mortgage Credit Availability Index published by the Mortgage Bankers Association fell 16.1 percent in March, for example.
“Thus, despite the barrage of articles online urging you to refinance, this option might be more difficult during this time,” the report says. “Borrower’s now need to demonstrate how they are ‘effectively managing their current assets’ during the pandemic. They must present their cost control and loss prevention incentives.”
Fewer commercial mortgage backed securities loan lenders are willing to shoulder the risk of accepting hotel mortgages, and as the risks passes to primary lenders it could lead to higher interest rates for those seeking to refinance.
“On an uplifting note, we are seeing more financial institutions seeking to capitalize on the various opportunities which this economic situation has presented. J.P Morgan and Blackstone Group, just to name a few, are raising significant capital to provide in the current market,” the report said. “We may see stronger refinancing opportunities soon.”
The report also lists various financing options, including loans through the Small Business Administration’s Paycheck Protection Program, part of the federal stimulus package.
“With the constant changes occurring every week pertaining to the situation and our economy, we urge you to stay up to date with reputable news channels and listen to industry experts to inspire your decision-making,” the report says. “This is a troubling time indeed, but it is not the first time our economy faces a hindrance on this scale. Be cautious. Be patient, and we will recover to once again flourishing economy.”