Hotel Bankruptcies On The Rise As Lenders Lose Patience With Recovery

February 19, 2021 – Media Mention

Partner and co-chair of Herrick's Restructuring & Finance Litigation Department, Stephen Selbst, was quoted in Bisnow discussing the ongoing trend of hotel bankruptcies. 

The past year has been a historically harmful time for the hotel industry as the coronavirus pandemic pushed demand off a cliff, and it has yet to climb back up. This fall wasn't accompanied by an avalanche of hotel bankruptcies, as lenders provided enough forbearance to keep hotel owners hanging on throughout much of 2020. That is now beginning to change. 

A string of hotel bankruptcy cases have been filed in the last two months, and hospitality finance experts believe this trend will continue to increase as owners of still-struggling hotels remain unable to pay their debt service and lenders are less flexible than they were a year ago.

"One of the reasons we're starting to see increased activity in terms of foreclosures now is lenders don't have the same sense of patience, and they don't have much confidence in a sharp rebound," said Stephen Selbst.

Stephen added, "Bankruptcies became more common during the winter months because lenders had previously been granting more forbearance in hopes that the end of the pandemic was near. The summer bump in occupancy had given them hope that the recovery might be underway, but that changed when a surge in COVID-19 cases again depressed the hotel market."

"Lenders started thinking maybe the worst was behind us in the middle of the summer last year, and then the fall came and things got worse again," Stephen said. "The wave of [bankruptcy] activity you've seen in January and February is an augury of what 2021 is going to look like for the hospitality industry."

Read the full article on Bisnow here. Access may require a subscription.