Iacono Discusses Hotel Industry Opportunities and How COVID-19 Recession Compares to 2008-09 with DLA Piper

November 20, 2020


Last month, CEO Joseph Iacono was interviewed in global law firm DLA Piper’s Breaking New Ground Q&A series. In the interview Iacono offers thoughts on opportunities in the hotel industry and how the impact of the COVID-19 pandemic differs from the 2008-09 financial crisis.

Q: How does the COVID-19 crisis differ from the 2008-09 financial crisis?

A: There’s more liquidity in the system today than there was during the 2008-09 financial crisis. The government responded faster to this crisis – in part, because it had the playbook from the 2008-09 financial crisis – and this resulted in the capital markets, equity markets, and bond markets stabilizing and recovering most of their value reasonably quickly.

Also, I think the dichotomy between underlying economic fundamentals, including employment and small business performance, versus what is happening in the capital markets is greater than during the financial crisis. I think that we’ve yet to feel the pandemic’s full impact on real estate.

As far as underwriting loans today, to some extent, it’s an issue of timing. If you believe that the health crisis is finite, one must project the financial impact and how long it will take to recover once there’s a vaccine. Most people agree that hotels will come back at some point and that people will travel and stay in hotels again.

Part of the solution is to require larger interest and operating reserves, and you are probably underwriting little, if any, rent growth because you don’t know how long it will take for things to recover. The overall result is more conservative underwriting to account for value adjustments to the underlying assets.

As far as the retail industry that was already experiencing issues pre-COVID around long-term demand, it is much tougher to project how things will look.


Q: Would you lend on a hotel in today’s environment?  What factors would you consider?

A: Yes, if the hotel asset was sound pre-COVID. I believe that the hotel industry will come back and that it is an interesting opportunity in today’s market. While it has been among the hardest hit, it is a matter of timing and projecting carry costs until there is a return to normalcy.

Read the full interview here.