The number of hotels defaulting on their loans surged 125 percent in May and June this year. Travel is down (no shit), which has an obvious effect on the top line. When there’s no money coming in, it’s hard to send cash out to meet some pretty hefty obligations. So, if none comes in, none can go out … and defaults start to rise.
Some high-profile properties have defaulted already, including the Four Seasons and Renaissance Stanford Court Hotel – both in San Francisco – and the W Hotel in San Diego. Nobody’s safe in this market. Outside California, 13 hotel loans adding up to $596 million became delinquent in June alone. Most of the carnage came from Phoenix, Las Vegas and New York City.
Of course, the defaults don’t spell the end for these properties. There is always the chance that the loan terms can be changed or the hotels can be sold. There’s a long way between defaulting loans and closed doors.