Hotel Loan Performance In A Rapidly Deteriorating Market

Predicting hotel performance over the next 12 to 18 months is like juggling chainsaws while riding a unicycle. In mid-2008, as the economy began to stall and the reality that a recession had already set in, forecasts for 2008 revenue per available room (RevPAR) growth finally moderated from approximately 3% to 0%. Only in January 2009 was it revealed that even this flat RevPAR assumption was overly optimistic. According to Smith Travel Research data, while RevPAR gains were seen in the first two quarters of 2008, the second half of the year was decidedly negative. Most telling is that RevPAR decreased 9.8% in the fourth quarter compared with the same period in 2007.

Given the inability so far for most individuals to grasp just how bad the economy is and how bad it will get, it would not be surprising to see RevPAR decline by well over 10% in...