The Cost of the Building Reaches the Room Rate
The Federal Open Market Committee raised the target range for the federal funds rate by a quarter percentage point on September 16, to 3.75% to 4%. The vote was 12-0. The new range took effect September 17.
A hotel loan is paid from room revenue. A higher benchmark raises the cash the property owes each month against the same keys, so the rate a distribution team can accept for a booking moves with the debt on the building.
The Long End Sets the Price
Fixed-rate hotel debt prices off the 10-year Treasury. The U.S. Treasury's par yield curve put the 10-year at 5.01% on September 16, 4.94% on September 17 and 4.96% on September 21. The first reading at or above 5% this year came on September 15. The yield stood at 3.97% on February 27 and 4.67% on May 19.
Pebblebrook Hotel Trust closed a $450 million senior unsecured term loan in February 2026. Of that, $360 million funded at closing to refinance an existing $360 million term loan, and the maturity moved to February 2031.
Where the Credit Test Binds
Trepp's August 2026 CMBS Delinquency Report, published September 1, put the overall delinquency rate down one basis point to 7.85%. Lodging rose 49 basis points to 5.84%, the largest increase of the five major property types. Office stood at 12.00%, retail at 7.20%, multifamily at 7.69% and industrial at 1.14%.
The special servicing rate rose 33 basis points in August to 11.42%, its highest level since February 2013. New transfers to special servicing totalled roughly $3.16 billion across 32 loans. Lodging added 11 basis points to 8.74%.
Trepp's five largest newly delinquent loans were office towers in Chicago, Los Angeles and Washington, D.C., an office portfolio spanning Washington and Northern Virginia, and one hotel, in New Orleans.
A property that fails the maturity test keeps the same reservation calendar while the lender re-underwrites it. The owner contributes equity, negotiates an extension, or sells.
The Supply Competing for the Same Nights
Lodging Econometrics counted 5,975 projects and 703,001 rooms in the U.S. pipeline at the end of the second quarter, with projects down 4.9% and rooms down 4.6% year over year. Construction starts rose 14%, and new project announcements rose 18%. Conversions reached a record 1,567 projects, and the luxury and upper-upscale chain scales set record pipelines.
A conversion puts branded rooms into an existing building, so the competitive set for a booking window can grow without a new tower.
Two Inputs for the Year
On the cost side, the 10-year Treasury. On the revenue side, the market's own occupancy and rate print against the debt the property carries into its next maturity.