Total $0.00


Fitch Ratings-New York-08 February 2016: Hotel owners will encounter a more challenging debt financing environment during 2016 as lenders respond to the broad repricing of risk (higher) across most debt capital markets and new regulations, says Fitch Ratings. 

'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,' said Stephen Boyd, Director of Lodging and REITs at Fitch. 

Sponsor quality will distinguish hotel debt capital access for the balance of this upcycle. 'Unlike loans made earlier in this recovery, lenders can no longer rely on the rising tide of hotel fundamentals to offset poor credit decisions,' said Boyd. 

Basel III regulatory requirements will continue to temper hotel development growth at the margin. Commercial banks have curtailed their development lending activity due to the high capital charges for so-called high-volatility commercial real estate (HVCRE) loans that apply to many highly-levered development loans under Basel III.

However, alternative capital sources will step-in to fill the void. Fitch expects lodging C-Corps. (i.e. brand owners) to increase the pace of their management and franchise (M&F) investments to use their balance sheets to support unit growth, as the cost of development financing increases and availability decreases.

Alternative lenders (i.e. private equity, hedge funds and mortgage REITs) specializing in mezzanine debt and preferred equity will play an increased role in hotel financing this year. Shadow banks are uniquely well positioned to solve hotel financing challenges given their greater flexibility than commercial lenders to take down the entire debt stack and sell off the senior piece of debt while retaining the riskier, higher return mezzanine portion.

About Fitch Ratings

For 100 years, Fitch Ratings has been making the future a little more predictable through independent and prospective credit ratings, commentary and research. Our global expertise draws on local market knowledge and spans the fixed-income universe. The additional context, perspective and insights we provide have helped the world's investors fund a century of growth.

Contact: Alyssa Castelli / +1 (212) 908 0540

Related News

Hospitality Financial Leadership: Educating Our Leaders is the Highest Form of Service

Hospitality Financial Leadership: Why Hotel Brands and Franchisers Secretly Love the OTAs

Hospitality Financial Leadership: Top 10 List – How to Create More Hospitality Financial Leadership

Hospitality Financial Leadership: The General Manager's Yardstick

Hospitality Financial Leadership: The Three Dimensions of Delegation

U.S. Lodging Fundamentals Portend Improved RevPAR Growth

Hospitality Financial Leadership - Creating and Using Your Own Labor Productivity Tools

Hospitality Financial Leadership - How to Read Hotel Financial Statements and The Link

Hospitality Financial Leadership - Who Has ALL the Risk and Why?

Fitch: Hotel Oversupply Raising US CMBS Loan Concern

Sonnenblick-Eichner Company Arranges $60,000,000 of Financing for The St. Regis Deer Valley, Park City, Utah

Fitch's 2018 Outlook for U.S. Lodging: Fitch Predicts Uninspiring Growth, with Some Upside Risk from Brighter Corporate Outlook

Sonnenblick-Eichner Company Arranges $22,000,000 of First Mortgage Financing for Shops at the Pier, on Behalf of Provenance Hotels and Bolour Associates, in Hermosa Beach, California

Sonnenblick-Eichner Company Arranges $35,000,000 of First Mortgage Financing for The Inn at the Market, Seattle, Washington

Hospitality Financial Leadership - Runnin' Down a Dream

Hospitality Financial Leadership - Four Important Things to Know

Sonnenblick-Eichner Company Arranges $16,750,000 of First Mortgage Acquisition Financing for the Normandy Hotel, Washington, D.C.

Premier Capital Associates Secures Refinance for Quality Inn and Suites in Sequim, WA

Fitch: Need for Scale Could Drive More US Lodging Consolidation

Atlas Hospitality Group Arranges Sale of Lone Oak Lodge Monterey

All News »

Please login or register to post a comment.