Market Conditions Will Tighten for Hotel Investors in 2016: Fitch

Hotel property owners will discover that interest rates have climbed, if they try to refinance loans this year, Fitch Ratings said.

In addition to higher rates, underwriting standards have also tightened for loans backed by hotel collateral, said Stephen Boyd, director of lodging at REITs for Fitch. The changes have been made in response to more challenging debt capital market conditions.

"Unlike loans made earlier in this recovery, lenders can no longer rely on the rising tide of hotel fundamentals to offset poor credit decisions," Boyd said.

Basel III capital requirements will also make it difficult for hotel developers to grow, as commercial banks have curtailed lending to development projects because of the higher capital charges.

As a result, private equity, hedge funds and mortgage REITs will play a bigger role this year in hotel financing.

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Originations Securitization Commercial lending CRE
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