A 'Big Disconnect' Between Hotel Fundamentals and Debt Markets Has Opened

A ‘big disconnect’ exists between hospitality market fundamentals and debt markets, as rising inflation stokes volatility. But a ‘substantial tightening trend’ could be on the horizon once the markets have better visibility into what’s to come in the future.

The debt markets are slumping even as hospitality fundamentals are showing strength – exceptionally so for many assets, according to JLL. But “in the current environment, inflation and the Federal Reserve’s response have taken center stage, despite the strong fundamentals,” the firm’s analysts note in a new report. “The credit markets fear that aggressive monetary tightening by the Fed could tip the economy into a recession, which has resulted in higher credit spreads and all-in loan coupons.”