AbstractsBusiness Management & Administration

Hotel financing and lender???s attitude towards financially distressed hotels and delinquent hotel loans: restructure vs. foreclosure

by Tingqiao Yang




Institution: California State Polytechnic University – Pomona
Department:
Year: 2016
Keywords: Hotel Financing
Posted: 02/05/2017
Record ID: 2124164
Full text PDF: http://hdl.handle.net/10211.3/169022


Abstract

Hotel delinquency is a research topic of increasing interest, with Morningstar reporting that the severity of hotel losses increased from 2008-2013 and that hotel loan delinquency peaked in 2011. This study presents an overview of trends in hotel delinquency, explores hotel financing risks and examines lenders??? attitudes toward delinquent hotel loans. A literature review examines criteria for hotel debt issuance and maintenance and lenders??? options when making decisions regarding loan modification or foreclosure. The research method is qualitative, involving semi-structured face-to-face interviews. The following discussion and results are drawn from the interview outcomes: (1) lenders utilize special servicers to make decisions regarding restructuring or foreclosure for defaulted loans; (2) lenders prefer to invest in franchised hotels rather than independently run hotels, hotels affiliated with multiple hotel brands, new hotel brands or boutique hotels; (3) factors triggering hotel foreclosure are loss of a hotel???s franchise or brand, low occupancy levels, poor management performance, a decrease in net operating income/cash flow and longer periods of delinquency; (4) lenders are willing to work with borrowers in a mutually agreeable manner to keep mortgage loan payments current and disfavor foreclosure because the hotel industry???s performance is market/economy driven, collateral security interest is expensive to collect, a foreclosed or closed hotel has a depreciated value and lenders seek to maintain their established relationship with the borrower. Advisors/Committee Members: Mao, Zhenxing (advisor), Singh, Neha (committee member).