For now, hotel finance trends can be summed up in one word: triage. Lenders are working out forbearance and debt structuring as tourniquet measures to stanch the fiscal bleeding, while governments craft stimulus packages, generate funds for small- and mid-sized business loans and try to pick up part of the tab of unemployed or furloughed workers. What’s the longer-term prognosis?

Expect more order. “The Federal Reserve will have to step in to regulate the CMBS market,” says Sloan Dean, president and CEO, Remington Hotels, Dallas. “Most of the US$86 billion outstanding is nonrecourse debt, and hotels are the collateral. That could translate to a default rate of 20% starting in late May/early June and into Q3.”

Anticipate challenges as deferred payments come due. “It’s not as if most lenders are forgiving debt; they’re just extending it,” says C. Patrick Scholes, managing director, lodging, leisure and gaming equity research, SunTrust Robinson Humphrey. Clients with strong relationships can expect more leniency; for smaller players, many of the deferrals will run out at or near the same time.

Watch for subtler plays as hoteliers get their footing. “In some cases, capital is coming in as a wedge between the senior loan and the borrower’s equity,” said Malcolm Davies, principal and managing director, George Smith Partners, at an early April webinar on the state of the hotel market. “Today, all parties are stakeholders, not rivals.”

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