‘The single most significant crisis’ of 2010

Like a gladiator returning from combat, the U.S. hotel industry has come face-to-face with a number of considerable challenges this year: dismal demand, plunging rates and lack of financing to name a few. Yet while murmurs of recovery have begun to echo from the masses, the fight is far from over.

Jim Abrahamson, InterContinental Hotels Group
Jim Abrahamson, president of the Americas for InterContinental Hotels Group, made this clear when discussing debt, which he called the “single most significant crisis that’s going to face us this year” during a panel at the AH&LA’s Hospitality Leadership Forum this week in New York.

“Debt is as large and looming as any issue facing our industry today,” he said. “And it’s not just our industry; it’s the entire world of commercial real estate. … We know there is a looming problem with the CMBS market and just general real estate loans.”

The issue was top of mind for Abrahamson, who had recently joined with leaders from America’s top public and privately owned real estate entities to discuss debt with members of the White House Counsel of Economic Advisors and the Federal Deposit Insurance Corporation during a meeting of The Real Estate Roundtable.

“They are very concerned about this,” he said. “… Their prediction as of the end of September is that we could see as many as 500 to 1,000 more banks being at risk of going out of business.”

During the meeting, members of the FDIC said at-risk lending institutions are facing tremendous pressure from appraisals, which are typically revealing enormous losses on invested assets, according to Abrahamson. Banks have begun raising reserves to cushion these financial blows, which could mean less lenient extensions on hotel loans.

“We got a pass this year, generally,” he said. “Banks haven’t been aggressive. They’ve kind of held off. We haven’t seen a lot of foreclosures. We’ve had some, but it’s not been widespread. (But) we have CMBS maturities in 2010 and 2011 that are looming.”

The news isn’t all bad, though. The industry has seen a number of successful refinancings of late, including FelCor Lodging Trust’s successful distressed-debt exchange last month.

But to get through 2010, Abrahamson said the industry has to establish a united front to lobby for extensions of TARP, TALF and other programs to ease the pressure on banks. He tasked the American Hotel & Lodging Association and the U.S. Travel Association with leading the charge.

“If (banks) don’t make it, we ain’t going to make it,” he said. “We have to take this on, because it’s going to be a battle ground next year.”