Weekly Wrap: Fewer college football crowds mean more hotel woes
The eyes of CMBS investors will be on Austin, Texas this fall...plus dozens of other major university towns where limited fan attendance and canceled football games threaten to further punish a hotel sector reeling from COVID-19.
As the college football season kicks off in certain parts of the country, hundreds of hotel properties located near major universities (and backing approximately $17 billion in loans held in commercial mortgage-backed securities) will be losing out on annual revenue usually garnered from visiting fans, alumni and hosting lucrative road-team accomodations because of pandemic-related restrictions.
Particularly impacted are hotels located near member schools of the nation's Power 5 conferences featuring powerhouse (and popular) football factories that generate millions during a handful of home games each fall.
DBRS Morningstar this week issued a commentary showing that 177 CMBS loans totaling $16.96 billion are secured by 291 hotels that are within five miles of university that is a member of the Big 10, Big 12, Pac 12, Southeastern Conference or the Atlantic Coast Conference.
While the campus towns in Big 12 territory have the least exposure with $943.4 million in hotel loans held in CMBS conduit or single-asset deals, nine of those loans representing 72.2% of the total balance are already delinquent or in special servicing.
Austin is the focal point, hosting 85% of the Big 12's delinquency or special-servicing exposure. The largest of those loans is the 1,048-kay Fairmont Austin Hotel (which secures a $300 million loan). The Fairmont loan is current, but it has been assigned to special servicing after the hotel was close between March and May, according to the ratings agency.
"While it is now open, the property and the overall Austin lodging market will continue to face near-term challenges," without having University of Texas football (and its average home attenance of 96,306) as its usual fall backstop, according to DBRS Morningstar. When the Longhorns take the field at nearby Darrell K Royal-Texas Memorial Stadium, the 100,000-seat capacity stadium will be restricted to 18,000 fans a game this year.
Besides limiting attendance, schools are also banning traditional tailgaiting gatherings of fans on campus grounds in efforts to contain COVID-19 spread.
The Pac 12 and Big 10 conferences postponed their 2020 fall athletic schedules including football earlier this year, although the Big 10 has sinced announced its members will begin playing football in late October.