Times are still tough for the hotel sector these days, whichmeans more lodging properties are likely to fall into distress inthe coming year. The forecast for the remainder of 2010 isn’t muchbrighter, with hotel occupancy expected to remain flat at 55%,average daily rate decreasing 3.2% to $94.39 and revenue peravailable room dropping 3.2% to $51.99, according to Smith TravelResearch.

|

Last week’s GlobeSt.com Quick Poll, with approximately 200 votescast, shows that 60% of readers think things will get crazier forhotel distress, while the other 40% believe we’ve seen the worst.Paul Sexton, vice president with Hospitality Real Estate Counselorsin Orlando and a 20-year veteran of hotel real estate, gives histhoughts on the matter.

|

“On the operations side of the equation, we’ve probably seen theworst of it. Rooms sold actually rose 2.6% in January, occupancieshave bottomed out and there is a realistic expectation that revPARwill swing positive by the third or fourth quarter of this year.Because most operators did an excellent job of cutting costs, cashflow will show huge improvements once revenues go positive.

|

“If you are on the transaction side of the equation, however,things will definitely get crazier. The simple truth is that thatthe industry was over-financed during the boom years, values havefallen off significantly and only a very small fraction ofdistressed properties have cleared the market.

|

“Add to that the fact we that there are still over 700 banks onthe FDIC’s troubled list, CMBS hotel delinquency rates are at 17%,loan maturities will rise each year through 2013 and we are likelyto see higher interest rates by the first or second quarter of2011. Crazy has only just begun.”

Want to continue reading?
Become a Free ALM Digital Reader.

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.