News
08
www.asianhospitality.com
September 2025 | Issue 24
ommercial mortgage backed
securities continue to see higher
delinquency rates despite some
recovery after the COVID pandemic,
with different hotel segments facing
different challenges, according to a
report by Trepp data and analytics firm.
The report also found that a decline
in capital expenditures is leading to
devaluation of hotel assets.
In 2020, delinquencies for lodging
sector CMBS spiked at 19.78 percent, up
from 1.51 percent a year before. Trepp’s
report breaks down that overall trend
and the post COVID recovery according
to their impact on the limited-
service, full-service and extended stay
segments.
Fighting deterioration
The Trepp report said investors
have grown concerned about a
decline in CapEx since the pandemic,
particularly in the limited-service hotel
segment. The result has been visible
deterioration in asset quality, meaning
many properties may be underinvesting
in upkeep, renovations and necessary
upgrades.
“Before the pandemic, the majority
of properties were spending within
a relatively healthy range of $750 to
$2,000 per key, with just 8 to 9 percent
falling below the $750 threshold
annually,” the report said. “High
spenders (more than $2,000 per key)
represented a modest but steady share,
ranging between 10 to 12 percent from
2017 to 2019.”
That CapEx investment stopped in
2020 and the share of properties with
CapEx below $750 per key jumped to 54
percent. Only 3 percent of properties
were spending more than $2,000 per
key on improvements as the pandemic
led hotel owners to defer capital
projects.
“Post-2020, one might have expected
a meaningful rebound in spending – a
‘catch-up’ period to address deferred
maintenance and bring assets back up
to brand or investor standards. But the
data suggest otherwise,” the report
said.
By 2024, the share of properties
spending less than $750 per key on
CapEx dropped to 6 percent. Trepp
said 13 to 16 percent were in the high-
spending range, roughly the same as
pre-pandemic levels.
“The middle tier ($750-$2,000 per
key) has absorbed the shift, maintaining
a roughly 77 to 78 percent share since
2021, suggesting that owners are
opting for moderate upgrades, but
not investing aggressively enough to
reverse the cumulative effects of 2020's
pause,” the report said.
Not in the clear yet
Despite some signs of recovery in lower
delinquency rates for full-service and
extended-stay hotels, the fact that the
rates remain high for limited-service
properties, combined with reduced
CapEx spending, mean the market is
recovering unevenly, Trepp’s report
said. The limited-service segment in
particular remains at risk for functional
obsolescence and brand erosion.
“As investors and lenders assess
lodging-backed CMBS exposure in
the current market environment,
headline delinquency rates should
be interpreted with caution,” the
report said. “Beneath the surface,
capital health and reinvestment trends
may offer a more accurate lens into
long-term asset viability. If capital
discipline does not return to pre-
pandemic norms, the sector could face
another wave of stress – one driven
not by occupancy or cash flow, but by
deteriorating physical infrastructure
and declining borrower resilience.”
Report: CMBS delinquency,
CapEx dip slowing recovery
Limited-service hotels are at particular risk if trend continues
Higher delinquency rates for commercial mortgage backed securities and a dip in CapEx spending
are slowing the recovery, according to a report by Trepp data and analytics firm.