The lodging sector continues to stand at the crossroads of risk and opportunity within the CMBS market, according to Trepp Research Director Stephen Buschbom. Over the past several years, hotels have endured a series of punishing blows—from pandemic shutdowns to what he describes as an “uneven recovery” that has left many operators struggling to keep up with vital capital expenditures. Deferred maintenance and underinvestment have begun to erode property values, threatening both near-term performance and long-term recovery prospects.
Trepp’s latest analysis, which examined the limited-service, full-service and extended-stay hotel segments, reveals a story of disruption and incomplete healing. In the years leading up to 2020, delinquency rates for all three categories had settled at historic lows after a period of calming starting in 2017. At the close of 2019, the overall CMBS lodging delinquency rate hovered at just 1.51%. But in the wake of COVID-19, that number shot up, reaching 19.78% by December 2020—higher than at any other point in the modern CMBS era.
The volatility was most acute among limited-service hotels. Their delinquency rate jumped from 1.44% in December 2019 to a dizzying 23.56% the following year, then receded to 8.83% by the end of 2021 and declined further to 3.48% a year later. However, with higher interest rates and tighter bank lending in 2023, delinquencies began to climb again, reaching 5.29%, and by July 2025, they had edged up to 8.35%.
Full-service hotels, heavily reliant on business travel and group bookings, saw their delinquency rate rise to 19.28% at the end of 2020. Although their recovery has been more measured than that of limited-service hotels, the July 2025 delinquency rate of 5.94% remains far above the pre-pandemic benchmark of around 1.6%, despite being below the 2023 peak of 6.21%.
Extended-stay properties initially fared better, buoyed by demand from traveling healthcare workers and essential personnel. Nonetheless, their delinquency rate, which was 13.6% in 2020, fell to just 1.38% by 2022—only to rebound to 4.03% in 2024 and 7.47% in July 2025.
Perhaps more troubling than delinquencies themselves is the mounting pressure on capital expenditures. Trepp notes that visible property deterioration is starting to alarm investors. Particularly in the limited-service segment, many owners appear to be delaying necessary maintenance, renovations and upgrades. Such tactics risk brand downgrades, rising vacancies and diminished appraised values.
Before the pandemic, routine capital expenditures ranged from $750 to $2,000 per key, with only about 8% to 9% of properties falling below the $750 threshold and 10% to 12% exceeding $2,000. The pandemic, however, caused a dramatic shift: the share of owners investing less than $750 surged to 54%, while those spending more than $2,000 per key dropped to just 3%. Since 2021, between 77% and 78% of properties have reported annual spending within the $750 to $2,000 range—a level Trepp says is insufficient to counteract the effects of 2020.
Buschbom cautions that headline delinquency rates may not tell the full story. Trends in reinvestment, he suggests, provide a more accurate gauge of a property’s health and future performance.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.