Business-Focused Hotels Reportedly Have Difficulty Accessing Credit

business travel

Business-focused hotels that survived the pandemic shutdowns are now facing other challenges.

Difficulty accessing credit is among the problems they are coping with today, The Wall Street Journal (WSJ) reported Monday (March 6).

Lenders are asking hotel owners to put up more capital because they are concerned that the changing habits of businesses are leading to lower occupancy rates, which in turn are causing declining property values, according to the report.

Beyond that, banks’ concerns about rising interest rates, inflation and a possible recession are leading them to be more conservative in their lending in this space, the report said.

At the same time, the would-be borrowers are strapped for cash, per the report.

Now, unlike during the pandemic, the hotel owners are not getting relief money from the government that allows them to negotiate better terms on loans. Plus, the cost of some hedging instruments has also gone up, in some cases well over tenfold, according to the report.

Amid these challenges, nearly one-third of the securitized hotel loans in the United States will come due by 2024. Typically, hotel owners must refinance debt every three years — much more often than offices or retail centers that do so only every 20 years, the report said.

In addition, the demand for space with large meeting rooms for business travel and conferences remains depressed, in part because meetings are still being held remotely in many cases. These issues have also made it more difficult to sell hotel properties, according to the report.

This news comes about six weeks after it was reported that while the amount of money spent on business travel by small- to medium-sized businesses (SMBs) has rebounded to 80% of pre-pandemic levels, that by global and multinational firms has lagged behind at 61%.

Corporate customers’ travel continues to face headwinds due to their being slower to resume travel, their concerns about a coming recession and their facing widespread layoffs in the technology sector.

In late January, an Alaska Airlines executive said that a lot of high-tech companies have “nearly turned off” their business travel.

“Even though the headlines are recent on these job cuts, we’ve been experiencing, especially some really large tech companies, their corporate travel has already been severely depressed for some time now,” Alaska Airlines Executive Vice President and Chief Commercial Officer Andrew Harrison said during the company’s Jan. 26 earnings call.