Due to the recent unprecedented event, the hospitality industry along with all other industries around the world has been damaged by COVID-19. Which results in a world economic crisis with domestic & international travels rapidly slowing, occupancy falling and hotels closing.
According to Savills, in March 2020, hotel occupancy across Dublin has declined by more than 90%. Savills has lowered its anticipated supply of new hotel bedrooms from March 2020 to the end of 2022, in Dublin by 32% (approximately 4,000 bedrooms), with over half of those expected in 2021. Tom Barrett, Director of Hotels at Savills Ireland has stated that "Just a few weeks ago, before the current restrictions, Savills visited Dublin hotel construction sites to observe physical progress. Based on these visits - and our own analysis - we expect hoteliers, developers and investors will complete most projects that have commenced construction, although the delivery and opening dates will slip."
The occupancy rate continues to drop rapidly worldwide. Consumers are not looking to book new trips or travel in the next few months, leading to more cancellation rather than reservation. The figure below shows the occupancy % change between 2019 and 2020, the week ending 22 March.
Next several questions are, what is the impact of COVID-19 on hotel loans? What are lenders, borrowers, and hotel owners currently facing? Since a number of business sectors including retail, aviation, travel, hospitality and tourism have seen hugely reduced cash flow due to the impact of the COVID-19 pandemic. There is no doubt that both lenders and borrowers should review the loans that they have in place. Here below are the options each party can do:
Furthermore, the below are discussion on do's related to managing loan. Things a lender should consider managing situation during this pandemic crisis are as follows:
The situation is difficult for everyone in the world since cash flow is limited in every business sector. Therefore, during this time, hotel lenders and borrowers should be proactive and follow the hospitality trend and performance, keep monitoring how banks are responding, legal analysis of hotel loans in distress and follow the suggested guidelines on the above statements to manage loans properly and to avoid any default.
Farazad Group Ltd.
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As the acting CEO of Farazad Investments (FI), Mr. Farazad, asserts market integrity and an unconventional approach to Structured Financing. He was awarded by the IAIR Awards as the ‘CEO of the Year for Structured Finance Europe Middle East & Africa (EMEA)’ 2015, and awarded with the ‘Best Structured Finance Company 2015’, by the European CEO. FI is headquartered in the United Kingdom and proud member of British Private Equity & Venture Capital Association (BVCA). FI currently operates across five continents, with a presence in the United Kingdom, Europe, Middle East, Asia Pacific, Australia and United States, with an ever expanding portfolio and new innovative funding ventures worldwide. Mr. Farazad’s unique approach has been at the forefront to the firm’s success and paved the way for international recognition from regulatory bodies, who actively seek out his expertise. It is this transparent approach to financing and creative thinking, which introduced an award winning in- house financing formula, which has been praised by international Institutions aspiring to adopt the formula and enhance traditional funding methodology.
Founder and Chairman of Farazad Group of Companies