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Excerpt from Reuters
U.S. hotel owners could see greater pressure on their ability to service the loans backing their properties, as a decline in leisure stays coupled with rising costs are expected to pinch their profits.
In the second quarter, many hotel owners reported rates of leisure stay anywhere between 25%-35% above 2019 levels.
But as the surge in travel after the pandemic wears off, demand is shifting away from pricey leisure stays and towards lower-rated group business travel, according to a Wednesday report from ratings agency Fitch.
Leisure travel will likely fall further in the event of an expected recession in the first half of 2024, the Fitch report noted.
“If there’s a recession, hospitality is the first-in and the first-out of any downward trend,” said Willy Walker, CEO of commercial real estate lender Walker & Dunlop (WD.N).
Several hotel owners defaulted on loans backing various hotels in 2020, when travel plummeted at the start of the coronavirus pandemic.
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