KBRA Releases Research – Lodging Loan Performance Clouded by Upper Upscale Chains

NEW YORK--(BUSINESS WIRE)--KBRA releases research on CMBS hotel chain delinquencies by chain scale, chain, and company brand.

U.S. hotels have performed well overall in the wake of the pandemic. With significant revenue per available room (RevPAR) growth, CMBS 2.0 conduit lodging delinquencies declined to 6.5% as of February 2023 compared to 23.7% in February 2021, when the rate was near all-time highs due to the pandemic. However, KBRA has observed meaningful diversion in the delinquency figures by chain scale, hotel chain, and company brand.

Key Takeaways

• The upper upscale chain had both the highest delinquent amount ($806 million) and rate (8%).
• For the larger balance upper upscale chains, Sheraton had the highest delinquency rate at 21.7%, with 16 of the 22 chains posting delinquency rates in the double-digits.
• The midscale chain had the lowest delinquency rate of all the segments at 3.1%, as well as the lowest delinquency balance ($22.6 million). Best Western, Candlewood Suites, and Extended Stay America Suites accounted for 60% of the delinquent balance.
• By company brand, Shilo Management Corp. had the highest delinquency rate of 83.8%, with seven of its nine underlying collateral properties being delinquent.
• The New York, Houston, and Chicago metropolitan statistical areas (MSA) accounted for almost one-half of the delinquent balance, aggregating $1.2 billion.

In addition, while there are still positive fundamentals and forecast growth for the upper upscale chains, which account for about one-third of the delinquent population, nominal RevPAR growth, a slowing economy, and the age and status of these delinquencies limit meaningful improvement in the overall lodging delinquency rate.

Click here to view the report.

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About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.