Checking in on U.S. Hotel Performance Since the Pandemic

U.S. hotel loans had the highest modification rate among the major property sectors, as borrowers asked for debt relief as a result of the pandemic. Lenders' willingness to work with borrowers coupled with federal stimulus and lending programs have averted a surge in foreclosures. As forbearance periods expire, it's unlikely we'll see an overwhelming increase in foreclosures even as many operators deal with underfunded reserves, which paid debt service and are critical to remaining competitive. Also, large group hotels in urban markets haven’t recovered as well as leisure hotels have. However, the hotel sector should continue its comeback buoyed by net cash flow that has rebounded close to, and in some cases exceeded, pre-pandemic highs.