Where are we in the hotel default cycle? About the front left tire. A better analogy than baseball innings is the video we’ve all seen of crash testing a car. Slowly the bumper touches the barrier, then starts to crumple, then the hood cones, and the tire distorts..and that’s where we are now- hotel defaults at 25%. Most servicer experts are saying second or third inning.

But that analogy leaves out the human element…the passenger.

Pay careful attention- the dummy doesn’t immediately lurch forward- not until the impact has gone to the windshield…then WHAM! So we are not yet to the WHAM! part. But fast approaching.

Borrowers are running out of gas- they have been holding on for a long time. AND revpar is still DECREASING in many markets. AND franchisors are starting to demand cap ex. AND maturities are building. Servicers should expect hotel defaults and foreclosures to ramp up in September…WHAM!