Owners Struggle to Pay Loans As Malls And Hotels Shuts Down

Covid 19 Makes It Hard for Malls And Hotels to Stay Open

November 16, 2020

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Roosevelt Hotel, which is located in New York, closed down last month. It is one of the latest hotels to shut down due to the Covid 19 pandemic. There are many hotels and malls that are closing down in major cities. There are 43 hotels in New York that are more than behind on their loans. Stores and malls in Chicago are facing a similar problem. There are over 30 stores in the area that are behind on their loans. Two of the biggest cities in America also have some of the biggest borrowers.

Hotel and mall owners have a combined total of $35 billion in defaulted loans. The reason that people have been struggling to pay off the debt is because they have not been getting much business. Covid 19 has caused travel and shopping to slow down considerably compared to this time last year. It is estimated that 14 percent of retail loans and 20 percent of hotel loans are in default. The crisis peaked in June, and there are fewer delinquencies now. However, loan defaults are still astronomically high.

Jamie Woodell is the vice president of commercial estate research at the Mortgage Bankers Association. He said that the pandemic has had a direct impact on hotels and motels. He also said that fewer people are going on vacations. Jamie also noted that retail stores have also suffered. There are fewer people going in the stores to shop. People are opting to shop online. In fact, people have purchased more online during these past few months than they have in the past five years.

Experts predicted that the malls would become irrelevant due to the increase in online shopping. However, it is happening a lot sooner than anyone could predict. JCPenny has filed for bankruptcy. The store currently owes $20 billion loans. Neiman Marcus Department stores are also going bankrupt.

It is estimated that 1,100 stores are going to shut down this year due to Covid 19. Pressures from online retailers have also caused the malls to cause. Experts are also expecting 25,000 stores to close this year.

New York may lose 1/5 of its hotels by the time that the pandemic is over. This means that over 6,800 rooms will have to be converted into something else. Stephen Michels is managing director for Cushman & Wakefield. He stated that the financial impact of Covid has been worse than that of 9/11.

Hotel occupancy rates dropped by a significantly percent over the past few months. The occupancy rate was 33 percent in June. It was 70 percent during the same month in 2019. Hotel nightly rates are also a lot lower. The average was $133 per night in 2020. Today, it is $83 per night.

Stephen stated that hotel delinquencies were not this high during the Great Recession. However, he is confident that the hotel industry will recover once the vaccine is developed. He also said that leisure tourism will likely be the first industry to bounce back.

Stephen expects that a lot more people will default on their loans before the year is out. Manuy Clancy is the senior managing director for applied data, research and pricing at Trepp LLC. He stated that malls started dying long before Covid because more people are flocking to online shopping. Manuy also stated the market will come back. However, the malls will likely be priced lower than they were in the past.

Owners Struggle to Pay Loans As Malls And Hotels Shuts Down

Covid 19 Makes It Hard for Malls And Hotels to Stay Open

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