What happened with hotel debt in 2020?

The story of what happened to the hotel industry in 2020 also has a sizable debt component. At the onset of the pandemic, the availability of hotel debt was almost nonexistent, creating challenges for owners that were facing debt maturities, according to Eva Wassermann, a managing director at GEM Realty Capital. As the economy started improving by midyear 2020, some lenders — primarily debt funds — started actively bidding on debt, but generally with high spreads of 600+ or more over LIBOR, coupled with low proceeds of 40 percent to 50 percent loan-to-value (LTV). As the year progressed, proceeds increased, spreads narrowed, and more lenders entered the market. Borrowers with solid balance sheets and properties with strong pre-COVID debt yields were more easily able to finance, notes Wassermann.

“Currently, more banks and other institutional lenders are getting back into financing hotels, particularly with their strong-relationship borrowers,” says Wassermann. “Depe