Foreign Tourism Keeps Hotels Afloat

As of September, hotel loan delinquencies accounted for a mere 0.23 percent of all outstanding hotel loans, according to Fitch Ratings’ latest U.S. CMBS loan delinquency index. But while foreign tourism has been a cornerstone of the U.S. lodging sector and international visitors may continue to visit travel hot spots, thanks largely to the wobbly dollar, lagging international markets may force more overseas consumers to cut back considerably on travel to the United States. The property type will also have to grapple with declining business and leisure travel. As for prospects for property subsectors in the coming year, on a scale of 1 to 9, with 1 being “abysmal,” 5 equaling “fair” and 9 indicating “excellent,” limited-service hotels received a 4.47 for investment prospects and a 4 for development prospects, according to this year’s “Emerging Trends in Real Estate.” Full-service hotels notched a 4.66 for investment prospects and a 3.96 for development prospects in the Urban Land Institute/PricewaterhouseCoopers L.L.C. report. The report also contends that investors should hold hotels.The future for the hotel industry, however, is anything but uniform across markets. “New York and Los Angeles full-service hotels could sustain occupancies and revenues,” the report predicted. “Airport hub business centers will generally fare much better than connector cities, while some more ‘off-the-beaten track’ metropolitan areas and suburban markets could ‘face bloodbaths.’”