US Hotels: Hardest Hit by COVID but Some Recovery in Sight

The US stimulus package should coincide with further lockdown easing as the vaccine is rolled out. With savings rates at historical highs, a major slug of pent-up cash is likely to make its way into the hard-hit leisure sector. And in that sector, hotels have been hardest hit, with average credit risk climbing by a staggering 456% from 58 Bps to a peak of 322 Bps in the past year. This is roughly a 1 in 30 chance of default over a one-year horizon.

Figure 1: Changes in Average Credit Risk, US Hotels and US Corporates

This move is the largest increase of any sector monitored by Credit Benchmark; Figure 1 shows that the equivalent increase for US Corporates overall is about 25%.

But despite occupancy rates below 50% of their norm and revenues down 35%, equity shares in some of these firms have been outstanding recent performers – since hitting bottom in May 2020, Marriot and Hilton are up 100%, Hyatt are up 150%, and Wyndham are up an astonishing 230% – better than Bitcoin.

Figure 2 shows the more recent, 6-month impact of COVID on 32 US hotels and casinos [please continue below to access full report].

Figure 2: Six month credit levels and changes for US Hotels and Casinos

Credit Benchmark data is now available on Bloomberg – high level credit assessments on the single name constituents of the sectors mentioned in this report can be accessed on CRPR or via CRDT . Get in touch with us to request your free trial for Credit Benchmark Premium Data and Analytics on Bloomberg.

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    Credit Benchmark brings together internal credit risk views from over 40 leading global financial institutions. The contributions are anonymized, aggregated, and published in the form of consensus ratings and aggregate analytics to provide an independent, real-world perspective of credit risk. Risk and investment professionals at banks, insurance companies, asset managers and other financial firms use the data for insights into the unrated, monitoring and alerting within their portfolios, benchmarking, assessing and analyzing trends, and fulfilling regulatory requirements and capital.