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Hotels: real estate that reprices every night (RevPAR)
· Asset or instrument
Fact, law or dataA rule, statute, definition or measured number.
Hotels are operating businesses inside real estate: rooms re-rent every night, so income moves with the economy almost immediately.
See it on the Money & Finance map →How it works
The key measure is RevPAR, revenue per available room: average daily rate times occupancy. A 300-room hotel at $200 a night and 75% occupancy earns $150 RevPAR, about $16 million a year from rooms. Owners usually hire a management company and pay a brand such as Marriott or Hilton franchise fees. Operating costs are high, so profits swing more than revenue. Lenders therefore offer lower leverage at higher rates, and often require a furniture-and-equipment reserve of about 4% of revenue.
Why it matters
Hotels show commercial property risk at its rawest: no long leases cushion a shock, so a recession or pandemic hits cash flow within weeks.
Think of it like
Like an office building where every lease expires every night.
Facts, rules and data
STR (CoStar) daily occupancy and RevPAR data, hotel REIT filings such as Host Hotels and Park Hotels, and Trepp's lodging CMBS delinquency data.
Debates and risks
Whether business travel has permanently shrunk since 2020, and how far leisure and group travel can fill the gap, remains debated.
Connections (2)
▸Hotels: real estate that reprices every night (RevPAR) lost most of its revenue in COVID-19 crash and rescue (2020)Fact, law or data
The connection
Hotels have no long leases, so when travel stopped, revenue vanished within weeks. In April 2020 US occupancy fell to about 25% and RevPAR dropped about 80% from a year earlier. With high fixed costs, many hotels closed temporarily, and lodging CMBS delinquency hit a record 24.3% in June 2020 (Trepp).
When and why
US and worldwide, March–December 2020; leisure travel recovered first, and US RevPAR regained 2019 levels by 2022.
How we know
STR occupancy and RevPAR data, Trepp CMBS reports, and hotel REIT filings showing revenue losses.
Debates and risks
Whether urban business and convention hotels, such as San Francisco's, ever fully recover remains debated.
▸Hotels: real estate that reprices every night (RevPAR) is often financed through CMBS: conduit loans pooled into commercial mortgage bondsFact, law or data
The connection
Hotel income swings, so banks lend cautiously and many owners use CMBS, including single-asset deals for big hotels; bond buyers accept the risk for higher interest. In trouble, non-recourse terms let owners walk away: Park Hotels stopped paying a $725 million CMBS loan on two San Francisco hotels in 2023.
When and why
US-wide; the Park loan covered the Hilton San Francisco Union Square and Parc 55, with the default announced in June 2023.
How we know
CMBS deal filings, Trepp property-type data, and Park Hotels & Resorts' June 2023 announcement and SEC filings.
Debates and risks
Whether lenders price hotel risk correctly, given that hotel delinquency jumps faster than other property types in downturns, is debated.