Loan defaults remain in check for now

Hotel & Motel Management, June 7, 2004 by Jeff Higley

Much of that belongs to CNL Hospitality's purchase of KSL Recreation Corp. ($1.8 billion) and The Blackstone Group's acquisition of Extended Stay America ($2.7 billion.)

Van said those transactions bode well for the hotel industry.

"It shows confidence coming back, and that could help keep the number of defaults to a minimum," Van said. "The hotel business has stabilized, and it looks like the bad news is over for now. That is encouraging for lenders."

Hanson said loans represent between 6 percent and 15 percent of a hotel's revenue, and with ADR, occupancy and revenue per available room showing dramatic year-over-year increases, the future looks positive. There could be a silver lining in the massive RevPAR drops of the last couple of years.

"To me, the headline is that the industry is much less risky than it once was," Hanson said.

He said that the 3-percent drop in occupancy over the last three years and the subpar revenues generated at most hotels, coupled with the relatively low delinquency rate, is going to benefit the hotel industry at some point.

"It should be reflected in future underwritings for hotels," Hanson said.

jhigley@advanstar.com