COVID-19: EIGHT Financing Strategic Options for Hotel Owners
By Harry Spirides President, Spirides Hospitality Finance Company | March 31, 2020
Along with all the other industries around the world the U.S. hotel industry has been blindsided by the COVID-19 Global Pandemic Black Swan Event. Instantly, hotel owners have found themselves with empty hotels, depleted cash reserves, and wondering how they will be able to make their monthly mortgage payments and payroll which were hardly ever considered to be a problem in the expansionary period leading up to COVID-19.
Due to the recent unprecedented sharp interest rate cuts by the Federal Reserve, the Prime Rate is now set at 3.25% which sets the table for many financing strategic options for hotel owners to consider. Debt refinancing, mortgage loan modifications, liquidation of assets, the SBA, and Chapter 11 Reorganization will become new buzz words in the hotel industry.
Below are listed eight hotel financing strategic options that hotel owners might want to consider during these days of economic distress. This article was written by hotel industry financier Harry G. Spirides who was previously owner & operator of a 205-room, full-service beach resort hotel for over 20 years. He is a third-generation hotelier who has over 30 years of experience working in full-service hotels. He is also a former commissioned officer in the U.S. Coast Guard and a military veteran. He specializes in arranging financing for hotel development, acquisition, and debt refinancing projects.
This is the time when leaders lead! Now is the time for action. Struggling hotel owners today have many financing strategic options available to them to act upon, but many of them do not even know that these options exist. So, it is my intent to outline some of these options clearly for them in the below paragraphs in which I am speaking directly to hotel owners.
1. Ask Your Lender to Modify Your Loan Terms and Defer Payments
During this difficult period of time I highly recommend honest, polite, direct, frequent, and professional communication with all your stakeholders. This includes your lender or loan servicer along with your corporate business attorney and CPA as well as your hotel franchise company and any third-party management company. It is always best to keep a friendly and professional relationship with them all. When you approach them you should convey your willingness to be flexible.