The Bellwether State Florida’s CMBS Hotel Defaults as a National Indicator

The U.S. hotel market faces worsening financial strain from commercial mortgage-backed securities (CMBS) loans, a trend acutely felt across the Southeast. By mid-2025, 86 hotels in the region had entered special servicing due to financial trouble, with Florida accounting for the lion’s share, cementing its role as ground zero in the nation’s hospitality debt crisis.

 

More than $6.2 billion in hotel CMBS loans are maturing this year, and the pressure is mounting, nearly 80% of 2025’s conduit hotel loan maturities are showing signs of stress, with only 21% considered both current and clean, according to Hotel Investment Today.

 

Amid this storm of expiring loans and rising operational costs, owners are forced back to the drawing board, seeking viable solutions under tighter financial conditions. Investors are proceeding with caution, wary of hidden risks. In tandem, lenders brace for a wave of refinancing challenges, loan workouts, and defaults in what’s shaping up to be one of the most turbulent years for hospitality financing in recent memory.

 

From Rebound to Reckoning

After years of subdued activity, the CMBS market staged a dramatic comeback in 2023, surpassing $20 billion in issuance, nearly double the combined total of the previous two years. The post-COVID economic rebound created optimism around hotel performance, driving borrowers toward CMBS for its relatively lower rates and greater leverage in an otherwise high-interest environment. This appeal enabled the issuance of many loans from 2020 to 2022.

 

However, that optimism is now colliding with a much harsher reality. A large volume of these loans is maturing between 2024 and 2025, coinciding with the post-pandemic hotel recovery’s plateau and a significant tightening of market conditions. Interest rates have soared, refinancing is far more expensive, and net operating income (NOI) remains soft, weighed down by elevated operating costs and a plateau in both leisure and business travel demand. With margins tightening across the broader economy, hotels are increasingly struggling to meet stricter lending criteria, including higher debt service coverage ratios (DSCRs) and required debt yields.

 

Indeed, the payoff rate for hotel CMBS loans was 79.7 percent in Q4 2024, down from 84 percent in Q3, indicating a rising share of borrowers are unable to refinance or pay off maturing debt, according to Morningstar DBRS. This trend is pushing many into distress just as their loans come due, leading to a wave of maturity defaults.

 

Quantifying Southeast Hotel Distress

The Southeast is teetering on a tightrope, with Florida leading the region in CMBS hotel distress. It far surpasses Georgia’s 22, with 42 hotels now in special servicing, compared to 16 in North Carolina and 6 in South Carolina.

 

But the pressure goes beyond geography. The real burden lies within the midscale and upscale hotel segments, which represent over 75% of distressed properties. These hotels are particularly vulnerable, caught between rising operating costs driven by inflation and price-sensitive travelers cutting back on discretionary spending. At the metro level, Atlanta leads the Sunbelt with 18 hotels in special servicing, followed by Orlando and Raleigh with 9 each, highlighting how uneven demand recovery and oversupply in key markets are deepening the distress.

 

Across the sector, CMBS lodging special servicing rates jumped 126 basis points to over 10% in April 2025, the highest level in three years, surpassing all other property types, according to SouthTrepp’s April and May 2025 reports. Notably, new transfers to special servicing nearly tripled month-over-month in April, marking this period as a critical low point for the nation’s hospitality credit market.

 

Florida: Unpacking Ground Zero

Historically, Florida has borne a long-standing concentration of hospitality debt exposure, as Trepp Data from 2020 shows that the state held over 10 percent of the nation’s total hotel CMBS loan balance, with 476 hotel loans on the national watchlist at that time. Now, that exposure is resurfacing. Florida not only leads in current hotel distress, but also in future risk. With 93 hotels on the watchlist, there’s apparent potential for future defaults, as the watchlist serves as a critical early warning, flagging properties with elevated maturity risk, underwhelming performance, or insurance complications, regardless of on-time payments.

 

Key Markets

A major tourism hub, Orlando is a primary contributor to Florida’s distress, where nine hotels have entered special servicing. Although the city saw occupancy rebound to nearly 77 percent in early 2025, it is contending with an overbuilt supply pipeline, which continues to disrupt demand dynamics and compress profit margins across the market.

 

Orlando, reliant on leisure travel and conventions, has struggled to regain pre-pandemic momentum, leaving it vulnerable to cyclical swings. Layered with operational challenges, the metro faces deeper financial fragility, ranking sixth in WalletHub’s 2025 financial distress index among U.S. sunbelt cities. The city also has the highest share of residents with distressed accounts, reflecting broader consumer strain. Though the ranking measures consumer health, not hotels, the effects often trickle down, reducing discretionary travel and straining mid-tier performance.

 

Miami and Tampa, two of Florida’s tourism-driven coastal hubs, are increasingly vulnerable, Miami in particular, despite resilient occupancy rates of about 83 and 80 percent at the beginning of the year. While these leisure-focused Southeast metros continue to attract international demand and investor interest, demand and occupancy are reverting to pre-COVID norms following several years of post-pandemic surges. The boom is cooling, occupancy is softening, and room rates are leveling off.

 

WalletHub ranked Miami ninth and Tampa eighth, signaling widespread economic pressures that could ripple through the hospitality sector. This deceleration exposes markets to slower revenue growth and tighter lending standards, especially for asset managers and owners who underwrote their assets at peak performance, assuming those elevated conditions would last indefinitely.

 

RevPar Trends and Growth Access Florida’s Key Markets

Between early 2020 to mid-2025, 12-month RevPar steadily recovered across Miami, Tampa, and Orlando. Year-over-year percent change sharply peaked in early 2022 before stabilizing across all three market sectors.

 

Flag Exposure

Consequently, a weighted portion of the sunshine state’s distressed assets is linked to specific brand portfolios. And the aftershocks of the low-rate era are now coming to a head. According to S&P Global Rating, over 25 percent of the state’s distressed hotels link back to a single La Quinta portfolio. As part of the LAQ 2022-LAQ Mortgage Trust collateralized by a $1.04 billion floating-rate loan tied to 109 La Quinta hotels and one Baymont.

The loan, originated in 2022, officially matured in March 2024, with options for three one-year extensions. Florida became a key pressure point, with 23 properties in-state making up 16.2% of the portfolio’s loan balance. In 2025, CoStar confirmed that the loan had been downgraded.

 

That exposure runs deeper than one loan. This portfolio is the product of years of layered financing and the cracks formed long before the debt faced a reckoning. It began with a $1.5 billion acquisition by CorePoint Lodging in 2021, which owned a significant portion of the La Quinta portfolio. While ownership changed hands, day-to-day operations remained tied to Wyndham Hotels & Resorts, which had acquired the La Quinta brand and management platform back in 2018. That deal was partially financed by a $1.6 billion term loan due in 2025, compounding exposure as refinancing pressures intensify. Florida’s La Quinta defaults aren’t an outlier, they’re a preview of how thinly stretched brand-heavy portfolios are reacting under rate pressure.

 

But La Quinta isn’t alone.

 

Fellow major mid-tier play, Courtyard by Marriott, is fighting its own battle. Fourteen properties from a 2021 CMBS portfolio are now in distress, with foreclosure or liquidation on the table. The properties trace back to Ashford Hospitality Trust’s 2018 CMBS deal, AHT 2018-KEYS, which officially defaulted in mid-2023 after being transferred to special servicing that spring. A partial refinance in early 2025 salvaged part of the portfolio, but the remaining 14 hotels, totaling 2,384 rooms, remain exposed. Ashford pointed to rising capital costs, sluggish local recoveries, and ballooning operating expenses as the drivers behind the fallout.

 

The Drivers of Hotel Distress

Maturing debt isn’t the sole culprit behind the intensifying instability of the CMBS hotel market. It’s the result of squeezed margins, lackadaisical demand, and unfortunate timing that’s now undermining even stable properties. The broader tone of the market is frugal as households tighten budgets and prioritize essential spending. One pressure feeds into the next, triggering a slow-moving domino effect that’s rippling across the sector.

 

As savings erode, so does discretionary travel. According to the Q2 2025 Travel Service Pulse Report, hotel occupancy plateaued for six consecutive months leading into quarter two of 2025, particularly in the economy and mid-tier segments, where rate sensitivity is highest. Corporate and group travel, once a reliable offset, hasn’t fully rebounded. Spending figures appear to recover, but actual room-night volume is still lagging. Travel patterns have shifted, and for hotels that once depended on a steady stream of weekday business travel, this mismatch is quietly eating away at performance.

 

Even prime assets are reaping marginal compressions. Inflation-driven increases in labor, insurance, and maintenance costs are compressing margins across the board. Meanwhile, brand-mandated renovations are becoming prohibitively expensive. Owners are struggling to meet their own standards, let alone those required by lenders.

 

Refinancing, too, is increasingly elusive. Interest rates remain elevated, and lenders are demanding stronger cash flows, higher DSCRs, and lower leverage. In markets like Florida, once a magnet for investment, owners now find themselves boxed in, unable to refinance, sell, or operate with meaningful profitability.

 

Stakeholder Imperatives

The unfolding debt crisis in Florida’s CMBS hospitality sector carries significant, differentiated implications for various market participants:

 

Owners and Operators

There’s immediate pressure to pursue proactive loan workouts and optimize operational efficiencies. Owners must also reposition brands or inject capital to strengthen performance and avoid default.

 

Investors

Due diligence is paramount. Underwriting must rigorously reflect evolving market fundamentals, particularly rising capital expenditure obligations and
the potential for extended volatility.

 

Lenders and Servicers

Servicers must prepare for heightened special servicing, complex restructurings, and potential liquidations continuing through 2025 and beyond. Such preparation is essential to minimize financial losses and protect stability in the hospitality loan market.

 

Florida’s Bellwether Role

Florida is no longer a debt hot spot. The Sunshine State is a real-time stress test for national CMBS hotel recovery. It offers vital lessons on adaptive strategies to manage the current debt cycle’s decline.

 

Synthesizing the Signals

Florida’s outsized exposure is more than a regional concern, it’s a barometer of systemic stress across the U.S. hospitality landscape. Distress is concentrated in mid-tier brands and oversupplied markets, underscoring the fragmented, uneven nature of hospitality’s post-pandemic recovery.

 

The following 12 to 18 months will test the industry’s adaptability. The peninsula’s position as a high exposure market makes it a national case study. How stakeholders respond, through workouts,
restructurings, and capital strategies, will help shape the industry’s broader playbook for navigating distress. Florida’s unfolding crisis may provide the clearest preview of how hospitality real estate endures the next credit cycle.