Bill Hoffman insists that he is not a prophet of doom, but some hotel industry executives might beg to differ. The founder and CEO of Trigild, a San Diego-based receivership and loan recovery specialist, predicts that the mortgage default crisis which has sunk many hotel owners will get much worse over the next two years.

The delinquency rate on CMBS hotel loans 30 days or more past due reached 18.45% in May, up from just 3.15% a year ago, according to Trepp LLC. Hoffman says lenders believe that 40% of all hotel mortgages originated in the last three to five years are in default or about to go into default.

“An improving economy is not going to be enough help, quite honestly,” says Hoffman, who has served as a court-appointed receiver on more than 1,500 commercial real estate assets. “Part of the reason is that values on hotels are going to remain very low. They are going to get worse. They are down 40% to 50% now [from their peak], depending on what part of the market you look at. It's much worse in some other cases.”

The majority of troubled CMBS hotel mortgages originated over the past three to five years were short-term loans, says Hoffman, and will soon mature. “It's a pretty safe bet that virtually none of those hotel loans can be refinanced.” His comments came during a panel discussion at the recent National Association of Real Estate Editors convention in Austin.

Check out National Real Estate Investor for the rest of the story.