The hotel industry is warning it could default on millions worth of collateralized loans within the next several months and deliver another financial shock to the U.S. economy without more intervention by the federal government, above and beyond the $2 trillion coronavirus bailout package just signed into law by President Donald Trump.
In a March 27 letter addressed to a host of federal regulators, the heads of the American Hotel and Lodging Association and Asian American Hotel Owners Association said the industry’s “unprecedented cash flow crisis” brought on by the COVID-19 pandemic requires a separate financial lifeline, as well as special protections from the sector’s legions of lenders and loan servicers. The letter specifically seeks relief in the so-called non-agency collateralized mortgage-backed securities, or CMBS, market, a stomping ground for Wall Street’s biggest lenders and a source for billions of loans to hotel owners throughout the United States.
Nationally, that figure totals roughly $86 billion in CMBS loans set to come due soon. And the issue is no less pronounced in Greater Washington, where more than $1.5 billion in CMBS debt backing hotel properties is slated to mature in the coming months.