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‘It’s Not A Question Of If, It’s A Question Of When’: Hotel Lenders Remain Hopeful For An Industrywide Recovery


The hotel industry has never seen a year like this one. The coronavirus pandemic has wreaked havoc on hotel occupancy and is expected to erase 10 year’s worth of revenue per available room, or RevPAR, the most closely watched metric of growth for the U.S. hospitality sector. 

Experts predict that it will take two to three years for U.S. hotel demand to return to where it was prior to the pandemic, but that doesn’t mean hotel owners and developers are out of options. Some hospitality lenders are choosing to look beyond the immediate and toward the future, where they see hope on the horizon. 

“The hotel industry is a cyclical one but it’s also very resilient,” said Lori Tirado, managing director of business development at Access Point Financial, an Atlanta-based hospitality lender. “It will rebound. It’s not a question of if, it’s a question of when.” 

Despite the hotel industry’s predicted long road to recovery, Access Point recently resumed actively lending to its hospitality clients. Bisnow recently sat down with Tirado to learn what led the firm to make that decision, what borrowers should expect when they reach out for a hotel loan and her outlook for the future of the industry. 

Bisnow: What does the lending environment currently look like for hotels? 

Tirado: It’s no surprise today that the current hotel lending environment is a challenging one. Few lenders are willing to pursue hotel deals and that has left a number of owners with an impending loan maturity wondering what to do. 

With that said, lenders have begun placing a greater focus on how the property or market performed prior to the pandemic, in 2018 and 2019. That has become a baseline for recovery. Hotel owners can expect lenders to approach their deals more conservatively. If a lender were to go to 70% on a loan-to-value ratio a year ago, that may look more like 60-65% today. 

Bisnow: What led AccessPoint to make the decision to start lending again?  

Tirado: There are good deals to be made today. Not all markets and chain scales were impacted equally. Our approach to lending has changed slightly: We are more conservative in our upfront analysis and dig into each transaction on a more micro level, to truly understand if there are any problems upfront. We adopted this approach so we could feel comfortable resuming lending. 

Our programs work perfectly for today's hotel owners, who may have a loan maturing in the near future and do not have many options for refinancing it. Many hotel owners are also utilizing our programs to help finance the acquisition of a hotel or acquisition and conversion to another brand.  

We fully understand hotel operations and base our decision to lend on the strength of the sponsor, the market the hotel is in and how much equity is going into the transaction. That being said, we are confident the industry will make a full recovery, and we wanted to get started helping our clients on that road to recovery now. 

Bisnow: What should hotel borrowers expect as they attempt to secure a loan?  

Tirado: A borrower should anticipate more upfront questions from lenders. A lender will want to understand how the hotel owner was able to manage in the spring, during the time period when most of the country was shut down. 

Borrowers should also expect changes to the way loans are structured. One of the changes will be an upfront interest reserve on most transactions. The interest reserve time frame will depend largely on how much that specific hotel or market was impacted by the pandemic, and how quickly the hotel seems to be returning to normal. For instance, a very upscale hotel in an urban market may require more of an interest reserve than a similar hotel located along the beach or in a drive-to destination.  

Bisnow: What is your outlook for the future of the hotel market? 

Tirado: A complete recovery for the industry will depend on a number of factors. First and foremost, it will depend on the resolution of the health crisis and a vaccine for COVID-19.  People have already resumed some form of leisure travel, but in order for the industry to really begin to recover, we need to see group demand return — less virtual conferences and meetings and more in-person events. That will only happen when we have a vaccine and the pandemic is completely under control.  

People need to feel safe to travel again. For the past several weeks, average hotel occupancy in the U.S. has been in the upper 40% to low 50% range. I believe it will stay that way for the foreseeable future, with some markets faring better than others, but we anticipate a complete recovery by 2023. 

This feature was produced in collaboration between the Bisnow Branded Content Studio and Access Point Financial. Bisnow news staff was not involved in the production of this content.