COMMERCIAL MORTGAGE BACKED securities proceed to see greater delinquency charges regardless of some restoration after the COVID pandemic, with totally different resort segments dealing with totally different challenges, based on a report by Trepp, a knowledge and analytics agency. The report additionally discovered {that a} decline in capital expenditures is resulting in devaluation of resort property.
In 2020, delinquencies for lodging sector CMBS spiked at 19.78 p.c, up from 1.51 p.c a yr earlier than. Trepp’s report breaks down that total development and the put up COVID restoration based on their influence on the limited-service, full-service and prolonged keep segments.
Break down by phase
Restricted-service properties, for instance, noticed probably the most unstable response to CMBS market challenges. Its delinquency fee climbed from 1.44 p.c in December 2019 to a peak of 23.56 p.c in December 2020. Transient demand and thinner working margins make the phase extra delicate to fluctuations, Trepp mentioned.
By the top of 2021, limited-service resort delinquencies have been down to eight.83 p.c and dropped additional in 2022 to three.48 p.c. Nonetheless, Trepp mentioned, delinquencies started rising once more in 2023, reaching 5.29 p.c that yr and eight.35 p.c as of July 2025, the best stage of any subtype and practically triple the general lodging common on the 2019 pre-COVID baseline.
Their reliance on enterprise journey, conferences and group bookings led full-service motels to be pressured to start with of the pandemic, Trepp mentioned.
“Their delinquency fee hit 19.28 p.c in December 2020 however has since seen a extra tempered restoration in comparison with limited-service,” the report mentioned. “As of July 2025, the full-service delinquency fee stands at 5.94 p.c, exhibiting modest enchancment from the 2023 peak of 6.21 p.c, however nonetheless meaningfully above pre-pandemic ranges (round 1.6 p.c).”
In contrast, the report mentioned prolonged keep motels noticed stronger efficiency to start with of the pandemic, benefiting from touring healthcare staff and important personnel. They noticed a 13.6 p.c delinquency fee in 2020 versus 19 p.c or greater for the others, Trepp mentioned.
“The phase had fallen to only 1.38 p.c by 2022,” the report mentioned. “Nonetheless, latest information recommend rising pressure: the delinquency fee jumped to 4.03 p.c in 2024 and seven.47 p.c as of July 2025. This latest uptick could replicate broader macroeconomic fatigue or oversupply in sure metro areas.”
Combating deterioration
The Trepp report mentioned traders have grown involved a few decline in CapEx for the reason that pandemic, significantly within the limited-service resort phase. The end result has been seen deterioration in asset high quality, that means many properties could also be underinvesting in maintenance, renovations and crucial upgrades.
“Earlier than the pandemic, nearly all of properties have been spending inside a comparatively wholesome vary of $750 to $2,000 per key, with simply 8 to 9 p.c falling under the $750 threshold yearly,” the report mentioned. “Excessive spenders (greater than $2,000 per key) represented a modest however regular share, ranging between 10 to 12 p.c from 2017 to 2019.”
That CapEx funding stopped in 2020 and the share of properties with CapEx under $750 per key jumped to 54 p.c. Solely 3 p.c of properties have been spending greater than $2,000 per key on enhancements because the pandemic led resort homeowners to defer capital initiatives.
“Submit-2020, one may need anticipated a significant rebound in spending – a ‘catch-up’ interval to handle deferred upkeep and convey property again as much as model or investor requirements. However the information recommend in any other case,” the report mentioned.
By 2024, the share of properties spending lower than $750 per key on CapEx dropped to six p.c. Trepp mentioned 13 to 16 p.c have been within the high-spending vary, roughly the identical as pre-pandemic ranges.
“The center tier ($750-$2,000 per key) has absorbed the shift, sustaining a roughly 77 to 78 p.c share since 2021, suggesting that homeowners are choosing average upgrades, however not investing aggressively sufficient to reverse the cumulative results of 2020’s pause,” the report mentioned.
Not within the clear but
Regardless of some indicators of restoration in decrease delinquency charges for full-service and extended-stay motels, the truth that the rates remain high for limited-service properties, mixed with diminished CapEx spending, imply the market is recovering erratically, Trepp’s report mentioned. The limited-service phase particularly stays in danger for purposeful obsolescence and model erosion.
“As traders and lenders assess lodging-backed CMBS publicity within the present market setting, headline delinquency charges must be interpreted with warning,” the report mentioned. “Beneath the floor, capital well being and reinvestment traits could supply a extra correct lens into long-term asset viability. If capital self-discipline doesn’t return to pre-pandemic norms, the sector might face one other wave of stress – one pushed not by occupancy or money stream, however by deteriorating bodily infrastructure and declining borrower resilience.”
