Seen the video of a Smart Car running into a Chevrolet Suburban? Ricochets off like a tennis ball. I just test drove both—the Suburban at the CRE Finance Council in South Beach with all the commercial mortgage-backed security special service gurus and the Smart Car at Americas Lodging Investment Summit in Los Angeles.

The Smart Car folks in LA are celebrating because the hotel business has recovered. Revenue per available room was up 8% last year and maybe 4% this year, and there’s no meaningful new supply. Optimism abounds and operators are pushing the accelerator to the floor … RECOVERY! Best time since the collapse of Rome to invest in hotels. And I studiously believe all that is true.

But unnoticed coming towards the one-way bridge is the Suburban described at the CMBS loan conference. Listen to them: “CMBS maturities remain a massive, massive, massive, massive problem.” (Yes he said “massive” four times) … “This is a long, slow slog, and there is no easy way out of this” … “The proceeds shortfall this year in commercial real estate loans coming due between face value and likely replacement loans is US$600,000,000,000.00 (I wrote out the zeros to make a point), and the gap in 2016 will be US$1,600,000,000,000.00.” (Stop counting; that’s one trillion, six hundred, billion dollars and no cents).

So the truth for hotels in 2012 is that the financial mass (not mess) of the very real hotel recovery just won’t be nearly powerful enough to overcome the huge financial mass (and mess) of hundreds of billions of loans coming due without any hope of replacement proceeds.

So if you can buy a hotel, do it! If you can hang on to a hotel loan, do it! But if you are in the Smart Car with heavy loans due, jump!

By: Steve Van

Source: HotelNewsNow