by Calculated Risk on 8/14/2009 08:47:00 PM

From Kris Hudson at the WSJ: Hotels Deliver Some 'Jingle Mail'

... From San Diego to Dearborn, Mich., an increasing number of hotel owners in the U.S. market are simply walking away ...

Distressed noncasino hotel loans now cover more than 1,000 properties with a cumulative loan value of $16.8 billion, according to Real Capital Analytics ....

Delinquencies of loans on casinos that have hotels adds 31 properties and $8.6 billion in distressed loans to the mix.

... According to Trepp LLC, the delinquency rate for CMBS tied to hotels was 4.75% in the second quarter, up from 0.5% a year earlier. Debt-rating provider Fitch Ratings predicts that rate will jump to between 10% and 15% by year end.

There is much more in the article.

A few points on hotels:

The occupancy rate has already peaked for the year (see graph below), and hotels that are struggling will be crushed in the Fall. So it is no surprise that Fitch expects the delinquency rate to soar.

Many hotels were purchased with too much debt based on optimistic pro forma income projections, and the owners are now far underwater.

RevPAR (Revenue per available room) is running about 16% below last year according to HotelNewsNow.com .

And there is more inventory coming (Supply growth to stifle RevPAR in 2010).

Click on graph for larger image in new window.

The peak occupancy rate for 2009 was probably three weeks ago at 67%.

And that is far below normal ... and it is all downhill for the rest of the year.

Note: Graph doesn't start at zero to better show the change.

Occupancy rates are far below historical levels, room rates are falling, there is more supply coming online - and many properties have too much debt. That spells Jingle Mail!