Global tourist numbers could drop 60%-80% in 2020
The COVID-19 pandemic has caused a 22% decrease in international tourist arrivals during the first quarter of 2020, data from the World Tourism Organization (UNWTO) shows. According to the WTO, the crisis could lead to an annual decline of 60% to 80% when compared with 2019 figures —numbers that potentially place millions of livelihoods at risk, the organization says. Available data points to a 22% decline in arrivals in the first three months of the year. Arrivals in March dropped sharply by 57% following the start of a lockdown in many countries, as well as the widespread introduction of travel restrictions and the closure of airports and national borders. This translates into a loss of 67 million international arrivals and about US$80 billion in receipts (exports from tourism).
U.S. hotels applying for federal loans in droves: AHLA
The American Hotel & Lodging Association conducted a survey of its members and found that over 95% of respondents applied for a Paycheck Protection Program (PPP) and/or Economic Injury Disaster Loan (EIDL), both federal loan and relief programs. Some 79% of applicants were approved for one or both. The median loan amount applied for was US$150,000 (the max PPP loan amount is 2.5 times company’s monthly payroll). The survey also shows many hotels struggling to obtain forbearance on CMBS loans – risking thousands of hotels going into default on commercial mortgage loans and ultimately foreclosure.
Growth rate of new supply has started decline
The growth rate of new hotel supply has already started a decline versus Q4 2019 stats, but hotels under construction will for the most part still likely open. That’s the news from a recent conference call between SunTrust Robinson Humphrey and global hotel supply data/analysts JP Ford of Lodging Econometrics (LE) to gain a better understanding around expectations for the hotel supply cycle. SunTrust anticipates more project delays and cancellations in future months. And reduced supply growth is overall a negative to the lodging C-Corps but positive for the lodging REITS.
Lodging Econometrics’ forecast, as of the end of Q1, is that U.S. new supply will be 1.9% in 2020 and 2.0% in 2021. Notably, these figures are down from 2.3% and 2.4%, respectively, versus forecasts as of Q4 2019. SunTrust assumes this reduction has been very recent and that there are still more under construction projects that may be delayed/halted over the next few months. Nevertheless, Lodging Econometrics anticipates the vast majority of new hotels under construction will eventually open.
Elsewhere: Chatham REIT amends credit
Hotel REIT Chatham Lodging Trust announced that it amended its US$250 million revolving credit facility. The trust focuses on investing in upscale extended-stay hotels and premium branded, select-service hotels and owns 134 hotels wholly or through joint ventures. Key terms of the amendment, which are applicable during the waiver period, are as follows:
- Waiver of key financial covenants through March 31, 2021
- Allows for full utilization of entire US$250 million credit facility
- Applicable margin on borrowings set at LIBOR plus 250 basis points if borrowings on the credit facility are under UA$200 million and LIBOR plus 300 basis points if borrowings are over US$200 million.
- Equity pledges on the 18 borrowing base assets
- Must maintain minimum liquidity of US$25 million whether in cash or available capacity under the credit facility