It was like a stab in the heart of the pulsating metropolis: in October, the Hilton in Times Square in Manhattan is closing its doors, 200 employees have to go. However, the management emphasizes that the closure is not final. When the situation returns to normal, the famous hotel could also reopen. In view of the fact that the lights are to remain dark on Broadway at least until the end of the year, that will probably not be the case any time soon.
The Corona virus has hit the hotel industry to the core, and the latest figures from the U.S. speak a clear language here: according to a study by Trepp Analytics, 23.4% of securitized mortgage loans to hotel properties in the U.S. are 30 days or more in arrears. By comparison, that rate was only 1.34% in December 2019. The 23.4% is a (sad) record, by the way. But the situation is by no means better in Europe either. Especially the Mediterranean countries Spain, Italy and Greece are hard hit. In their countries, tourism accounts for an above-average share of economic output. Once again, Greece is at the top of the list, where tourism contributes a whopping 20% to GDP. Many banks from these countries have granted payment moratoriums to the affected borrowers, and the respective governments have also put together aid packages. However, it is also a fact that this only postpones the problem. The banks can, of course, extend the loan deferrals again for, say, six months. At some point, however, they could then become vulnerable themselves if their share of tourism loans becomes too high compared with their overall portfolio. In any case, we can expect an increase in nonperforming loans in the tourism sector.
As always, however, opportunities also arise in such difficult times. For example, there are reportedly talks about a merger between Accor and Intercontinental. Should this really happen, it would create the largest hotel company in the world. France’s Accor is certainly under increased pressure: it was recently downgraded to junk status by rating agency S&P. It was also kicked out of France’s benchmark CAC 40 index in early September. In a merger, Intercontinental would probably be the dominant partner, as it would be larger. Geographically, the two companies would complement each other very well; Accor is strong in Europe and Asia, Intercontinental is more dominant in North America.