Posted on 11/28/2009 9:06:27 PM PST by george76
Like many home owners, hotels are starting to drown in debt.
They have been enticing travelers all year with sweet deals: credits for in-house spas and restaurants, up to 50 percent off five-star rooms, even free nights.
But all that discounting hasn't stopped occupancy from dropping an average of 10 percent. The result? Hotel loans have begun falling into delinquency faster than any other kind of commercial real estate debt.
The rising defaults paint a grim picture...
The oversupply means room rates should stay low for at least another year, good news for consumers but not so great for hotel owners and the banks that lent them the cash to build or buy.
The rise in delinquencies is sharp. Five times more hotel loans are behind on payments this year than in 2008... In October, 8.7 percent were distressed, compared with 1.5 percent last year.
That's almost double the 4.8 percent rate for commercial property and the 4.5 percent rate for stores.
What happens when a hotel loan goes bad? Banks are much less willing to seize them than houses because running a hotel requires know-how. But some hotel owners are just handing back the keys where property values have plummeted.
(Excerpt) Read more at news.yahoo.com ...
People voted for this. Maybe fewer hotels for the Patel clan too.
Maybe a hotel at every corner was a bad idea?
/Texas.
1. Location -You need to be a destination/transient combination, not on a lonely exit on the interstate.
2. You need a strong flag that is right for the area.
3. You need operators who know their business, not some real estate developer or doctors group who think "this is easy".
4. Lastly and very important; never never never over leverage a property.
Blah, blah, blah, blah. More stories about how bad things are. All of this is political maneuvering, nothing more. The markets will NOT go down significantly. The government is not going to allow that to happen. I’ve thought for years that all of this could not hold up — I was wrong. Shorted the market and have been ruined financially. It is NOT going down.
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