Garnet Capital Advisors Blog

EXCERPT: Americans are taking short vacations close to home these days, and leisure hotels near population centers and the beach communities are doing rather well. This goes to show that not all loans are faring equally, as some are not doing so well, while others - such as hotels in various markets across the US - are booming.

The travel and hospitality industry has taken a massive hit as a result of the coronavirus pandemic. Still, not all businesses in the travel sector are doing as badly as would be assumed.

In fact, many local US hotels are faring quite well.

While it's true that American would-be vacationers and business travelers are staying within the confines of the U.S. borders and are not traveling abroad, many are still taking their holidays - albeit on US soil.

Beach Locations Leading the Pack

There are plenty of hotspots that people can still enjoy without having to go very far, and coastal areas, in particular, are continuing to see plenty of traffic despite the current health crisis. This past summer did not see any lull in activity among many hotels as people headed to beaches for a quick getaway and break from the exhaustion of the pandemic.

Plus, there's been a surge in remote workers and school-aged kids learning online, leaving more room to vacation at any time of the year rather than predominantly within the typical school holiday schedules.

People are simply tired of being confined to their homes and their immediate surroundings and are looking for a way to escape, and hotels within the boundaries of the US are readily available to fill this need.

Hotels lining these beaches are reaping the rewards. Occupancy rates at certain hotels are even outperforming the average. In the Virginia Beach area, for instance, occupancy rates at various hotels are in the 70 percent range.

Oceanside markets like San Diego, Los Angeles, Virginia Beach, and the Jersey Shore are having a decent year so far.

Many Americans who may have put off traveling earlier in the year may be looking to the latter part of 2020 to travel, as advance hotel reservations for September and October are higher than they were at the same time last year for many hotels.

RV, Vacation Home, and Outdoor Leisure Markets Also Booming

Not only are various hotel markets across the country seeing a surge in occupancy rates, so too is the RV industry. Many RV companies are having a tough time keeping up with order rates.

Vacation properties and businesses like golf courses and boat marinas are also seeing the benefits of people looking to boost their day trip activity. These days, it may be more difficult to find boats, water skis, and other outdoor leisure equipment due to heightened demand.

Further, coastal communities are experiencing robust homebuyer activity, which is helping to drive prices up. In Cape May County in New Jersey, for example, median home prices increased 36 percent year-over-year, while Atlantic County has experienced an 18 percent increase.

People are taking advantage of extremely low mortgage rates, which is helping to fuel homebuyer demand.

Lenders May Want to Add Sound Commercial Loans to the Books

Not all loans or loan segments are faring equally. While some may be lagging, others - such as commercial loans made to certain hotels - are doing surprisingly well in this economic climate. Any buy/sell decisions that lenders make should be done with a granular analysis done pre-transaction, and Garnet Capital can help with that.

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