The Fed is signaling another rate hike with SOFR already at 3.63%, and any hotel owner carrying floating-rate debt who hasn't stress-tested against a 4% federal funds rate by year-end is managing by hope, not by math.
A 25 basis point hike on a $20M hotel loan adds $333 per room in annual debt service, and that's the easy part to model. The interest rate caps expiring across 2025 and 2026 are the line item most owners haven't stress-tested yet.
The Fed held at 3.75%, futures are pricing higher by year-end, and that $20M floating-rate loan you underwrote in 2023 is quietly eating your NOI from the inside. The owners who haven't stress-tested their debt stack against a flat-to-rising rate environment are about to learn what "recalibration" actually costs.
March CPI just printed at 3.3% and the Fed is now discussing hikes instead of cuts. If your hotel acquisition was underwritten assuming SOFR would be 150-200 basis points lower by now, the refinancing math isn't tight... it's broken.
