The financial crisis in the United States, followed by doubts about Credit Suisse, will not help hoteliers. But, we can admit that holiday bookings may slow down too but for other reasons: soaring food costs, energy increases and retirement protests, among others!
A sudden financial crisis
The fall of Silicon Valley Bank and Signature Bank, will ultimately lead to a shift in funding sources, difficulties in obtaining hotel construction loans and a slower recovery from the already difficult lending environment , according to hotel analysts and owners.
What does this mean for hoteliers?
Many publicly traded hotel real estate investment trusts have inordinate exposure to hotel ownership in the greater San Francisco area.
An example with Sonders Holdings
Sonder Holdings, a hospitality company that handles short-term apartment hotel rentals around the world, said March 10 that it has approximately $20 million in deposit accounts with Silicon Valley Bank.
The company also has a $60 million line of credit with SVB “issued in the normal course of business for the benefit of landowners and other counterparties, of which $13 million is currently drawn in the form of letters of credit.”
Sonder said he was “actively monitoring the situation with SVB and will take appropriate action if necessary”.
Hoteliers will find it more difficult to obtain loans
“Increases in mortgage interest rates will force some hotels to increase their equity as debt service coverage ratios fall below acceptable levels, and origination of loans will require more capital outlays than in the past. quarters,” Laurel Keller of Newmark Valuation and Advisory said in an email interview. ” If hotel owners fail to refinance on maturing loans, they could be forced to sellwhich would put downward pressure on prices.
“Additionally, hotel owners who are over-leveraged and/or whose properties continue to face the impacts of the pandemic are the most likely to face mandates to sell. However, many developers and investors remain pragmatic, expecting a more favorable long-term lending environment and staying the course with planned developments.
Banks will be more cautious
William Meyer, chairman of Meyer Jabara Hotels, which owns and operates hotels, said he expects banks to tighten underwriting standards in the near term as they work to protect their balance sheets.
The tourism sector in France has been preserved by €45.5 billion in public aid
The tourism sector benefited from €45.5 billion in public aid in 2020 and 2021, provided by the State and its operators (the evaluation does not cover the measures implemented by local authorities, including the magnitude is less). 98% of companies received at least one aid over this period. This aid compensated for 88% of the loss of gross operating surplus and 25.8% of the loss of turnover in the sector. They made it possible to reduce the bankruptcies of tourism businesses by nearly 44% in 2020 and 2021 compared to 2019. The level of staff in the tourism sector has stabilized overall, with a drop limited to 0.4% between the end of 2019 and end of 2021.
The Court of Auditors specifies that the sector has missed the transformation of tourism
Some measures, with limited funding compared to emergency measures and without any real consistency with them, carried an ambition of digital and ecological transformation of the sector.
THE ” digital check of €500, although requested by 18,922 tourism companies, does not seem to have generated a leverage effect to strengthen the use of digital technology in companies.
The support devices ecological transition led to the energy improvement of small equipment, but did not allow the sector to begin its sustainable transformation.
Failing to promote real progress, these measures constitute preliminaries to a new dynamic of transformation: the strategy developed within the framework of the new Destination France plan could give impetus to it if tourism professionals seize it.
Finally, we see that the recruitment difficultieslinked to an old problem of attracting and retaining staff, seem to have increased further since the health crisis.
What about inflation and protests?
It is still difficult to measure the effects of inflation and the current protests. The level of reservations seems to satisfy most tourism professionals both in France and Germany for the months of January, February and March. It is to be hoped that the impacts will be limited, knowing that more than 75% of French people will spend their holidays in the territory.
