- Recovery from the impact of Covid-19 on the hotel sector has been hampered due to the emergence of new variants and the timing of a full recovery remains uncertain.
- Small, highly leveraged players were much more impacted by Covid-19 as compared to top tier groups that presented moderate leverage before the pandemic, benefitting from asset-light business models.
- The credit profile of small hotel players is expected to remain high-risk over the medium term due to increased backlog of financial debt. An increase of mergers and acquisitions in the sector is expected in the short to medium-term.
- Net LTV ratio is key to assess and differentiate the credit profile of small highly leveraged hotel players that are also property owners.
- External credit ratings may be even more useful both for borrowers and lenders during severe crisis in hotel demand when typical EBITDA based credit metrics alone are not enough to assess a borrower’s credit profile.
HOTEL MARKET AND RATING CONSIDERATIONS
11 Apr 2022