National CRE News In Your Inbox.

Sign up for Connect emails to stay informed with CRE stories that are 150 words or less.

Sub Markets

Property Sectors


National  + Hospitality  | 
Hotels comprised the most frequently auctioned distressed property type in 2021

The Hotel Sector’s on the (Rocky) Road to Recovery

Seemingly on the ropes—or down for the count—a year ago, the lodging sector is now in the early stages of a rebound. That’s among the key conclusion to be drawn from a new report by Trepp, although the road to recovery won’t be without ruts and potholes.

“At this point in 2021, the economy looks to show signs of continued improvement,” said Maximillian Nelson, Trepp research analyst. “The Federal Reserve, fresh off the heels of a $1.9-trillion relief bill, is committed to keeping interest rates low and maintaining an accommodative monetary policy which could, in turn, affect the lodging commercial real estate sector, which has been greatly impacted by the coronavirus pandemic.”

Further, more than 25% of all Americans have received at least one dose of a COVID-19 vaccine and the federal government was administering 2.76 million shots per day as March ended, Trepp reported. By mid-April, President Biden says 90% of all U.S. adults will be eligible for a vaccination. 

Following the recent downward trend of the overall delinquency rate, in February the lodging sector also posted its largest drop in the delinquency reading since October 2020, dropping 272 basis points to 16.38%. For March, the overall rate fell even further, dropping 41 basis points to 15.95%.

Within that still-elevated delinquency rate for hotels, Nelson says a lone bright spot is the extended-stay subtype, which has continued to see lower delinquencies. It ended March at 7.31%.

“This was reflected in the market recently as Blackstone and Starwood Capital Group acquired Extended Stay America Inc. for $6 billion,” reports Nelson. “The move reinforces the subtype’s stronger performance relative to other lodging segments as those hotels are primed for longer stays, marking them as an economically resistant alternative to short term options yet more flexible than leasing an apartment.”

March also saw a slight decline in the lodging special servicing rate. At 24.25%, though, it’s still the highest among the commonly tracked CRE-property subtypes. The special servicing portfolio is concentrated in the full-service, limited-service, and “other” subtypes, all with special servicing readings north of 20%.

Throughout 2020, Trepp also tracked the number of loans that saw appraisal reductions. According to the TreppInsights Business Intelligence tool, more than 440 loans had their value reduced since 2020 – amounting to more than $1.3 billion in reductions as of February.

For context, Nelson reports, “While the future looks bright, it is important to acknowledge the perilous year the lodging sector faced in 2020. According to CBRE, in December 2020 hotel occupancy was down -44%, and rooms revenue was down -56.3%, year-to-date. According to the monthly report, the average hotel saw a 78% decline in Gross Operating Profits (GOP), leading to the lowest GOP margin in the past 82 years.”


Inside The Story

Download the report

About Paul Bubny

Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 15-20 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces. Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications. Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).