This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies.  Find out more here  Close
Survey: Lending environment stable in 2014
January 27 2014

The 2014 hotel credit market will look a lot like 2013’s, with lenders taking a disciplined approach to debt, according to a survey conducted by RobertDouglas, STR and Hotel News Now.

Highlights
  • “It feels good out there in the market,” RobertDouglas’ Robert Stiles said.
  • Nearly half of the lenders surveyed expect to keep their loan volumes on par with 2013.
  • More lenders are talking about construction loans.
 
By Shawn A. Turner
HNN contributor

REPORT FROM THE U.S.—The hotel credit environment is expected to remain stable during 2014, according to a survey of lenders from RobertDouglas, Hotel News Now, and STR, the parent company of HNN. 
 
Nearly half (48%) expect their overall lending volume to remain constant when compared to the trailing 12 months, while 35% said they either plan to increase significantly (6%) or moderately (29%) their lending volume. The fourth quarter 2013 survey comprised more than 50 lenders representing more than 75% of all hotel debt with loan balances in excess of $10 million originated in the United States in 2013.
 
“It feels good out there in the market,” said Robert Stiles, a principal and managing director at RobertDouglas.
 
Lenders also are feeling comfortable about the overall economic and lending cycle, according to the survey. Nearly four out of five lenders (77%) said property values are likely to increase slightly during the next 12 months with another 15% indicating that values will grow significantly.
 
And those surveyed said there is still runway left in the current hotel cycle, with 46% saying growth in hotel asset valuations will not peak for another two to three years. Yet, despite all the good feelings, lenders appear to be taking a more restrained approach to providing debt.
 
At this point in past cycles, Stiles said, lenders were willing to focus on forecast pro forma performance, but not this time around.
 
“Lenders are still really disciplined in this cycle as opposed to past cycles,” he said.
 
Steve Hennis, a director at STR Analytics, a sister company of HNN, said there could be some concern in the market over where interest rates are heading. “There’s a big difference in getting a 4% or 5% loan.”
 
Indeed, a majority of the lenders surveyed responded that they believe interest rates will rise during the next 12 months. More than half (57%) see a moderate increase from current levels, while 11% forecast a significant increase. About a quarter (26%) expect rates to remain relatively constant, and 6% believe there will be a moderate decrease in rates.
 
“Generally right now, we are in a sweet spot and we don’t know how long it’s going to last,” Stephen O’Connor, a principal and managing director at RobertDouglas, said of the interest rate environment.
 
Construction lending
One area where there is at least a little more appetite for debt is in the construction financing market. Stiles said lenders today are much more interested in talking about possible construction deals than previously, when construction lenders were difficult to find.
 
Of the construction lenders surveyed, the average loan-to-value sought was 67.5%, which is a stark contrast to where LTVs were a couple years ago, Hennis said, when LTVs were closer to the 50% range.
 
The markets that are getting the greatest interest, according to the survey, are those most familiar to lenders, namely, urban in-fill locations.
 
“We’re certainly seeing that if you can get construction financing, it’s not terrible,” Hennis said of the loans being made.
 
He said he is not surprised construction loans are popping up more frequently on lenders’ radar. “It’s the next growth phase.”
 
COMMENTS   Show All
Login or enter a name   Post Your Comment  Check to follow this thread via email alerts (must be logged in)
(4000 characters max)

Comments that include blatant advertisements or links to products or company websites will be removed to avoid instances of spam. Also, comments that include profanity, lewdness, personal attacks, solicitations or advertising, or other similarly inappropriate or offensive comments or material will be removed from the site. You are fully responsible for the content you post. The opinions expressed in comments do not necessarily reflect the opinions of Hotel News Now or its parent company, STR and its affiliated companies. Please report any violations to our editorial staff.

TRENDING
Airbnb casts a long-term shadow
13 hotelier takeaways for year 2020
Investors shift as Starwood’s review rolls on
Hoteliers embrace the Age of Authenticity
How to create a better comp set
How to use your revenue management toolkit
VIDEO
The hotel industry’s most overused clichés
Apple stays true to its core post IPO
MCR pursuing smart hotel development
Deconstructing a guest review
With every great opportunity? A challenge
LATEST NEWS
Hoteliers, associations slam NLRB decision
3 ways to make the most of the Pope’s US visit
Another record year for hotel fees, surcharges
Experts discuss whether to bundle resort fees
5 things to know about July performance
Freitag’s 5: July marks 5 years’ RevPAR growth
Contact Us
Hotel News Now
18500 Lake Rd.
Suite 310
Rocky River, Ohio 44116
        
Copyright © 2004 - 2015 Hotel News Now, a division of STR, Inc. All Rights Reserved.   Privacy