Hotel Lenders’ Purse Strings Tighten

Fitch sees an impact from Basel III regulations on hotel lending.

NEW YORK CITY—For hotel financing, it may be premature to declare the party over, but at the very least the guest list has gotten more exclusive. Summing up key takeaways from panelists at last month’s Americas Lodging Investment Summit conference, Fitch Ratings on Friday predicted “a more challenging debt financing environment” this year as lenders respond to the broad repricing of risk across most debt capital markets and new regulations.

“Borrowers can expect higher interest rates and tighter underwriting standards for loans backed by hotel collateral as lenders adapt to more challenging debt capital markets conditions,” says Stephen Boyd, director of lodging and REITs at Fitch. Sponsor quality will distinguish hotel debt capital access for the balance of this up cycle, with lenders taking “a holistic approach” to judging sponsorship quality.