Consumers are ready to return to pre-pandemic levels of travel, and that is ushering in a resurgence for a large segment of the hospitality industry. However, uncertainty over the economy, is making a similar resurgence difficult for some hotels, especially those catering to the business traveler.

The decline in business travel has greatly impacted business-centric hotel properties, especially those with sizeable meeting rooms and conference centers. Across the country, business hotel property values have dipped, making refinancing a greater challenge. Hotel loans routinely have shorter terms. The necessity for more frequent refinancing makes these loans more susceptible to the ups and downs of a volatile market. 

At present, lenders are apprehensive and have grown more weary of making new loans and/or refinancing existing loans on certain hotel properties and portfolios. To combat some of the current market conditions and lender apprehension, it will be necessary for operators, especially business hotel operators, to find creative ways to make use of and generate business from larger meeting spaces and conference centers which experienced higher demand pre-pandemic.

Moving forward, it will be important to monitor how the lending industry underwrites loans on hotel properties and whether lenders are willing to negotiate borrower friendly terms needed to keep some hotels afloat. Additionally, it will be interesting to see if both leisure and business travel will rebound and reach some semblance of pre-pandemic levels, giving the entire hospitality industry a much needed economic boost.

This post was co-authored by Princeton finance associate Brook Weese.