The current turmoil in the credit markets started in the US and it might be reasonable to suppose that the US will be the first market to show a way out.
But at this year's Americas Lodging Investment Summit, held in Los Angeles this week, discussion on conditions for financing hotels were marked more by their opacity than clarity.
The debt lenders panel, which featured representatives from Royal Bank of Scotland, Calyon, WestLB, Countrywide (which is about to be absorbed into Bank of America) and Capmark, all declared themselves open for business but admitted little was being done.
Warren de Haan, a managing director at Countrywide, was probably the most open when he said that the volume of business was down 90% to where it was in the summer. And he further warned that even this pace was set to slow.
"The meltdown in the credit markets means that until we see clearly we won't see any origination of loans," he said. "Things are going to get worse and valuations are going to be impacted across all product types. The question is how much?"
Bruce Lowrey, a senior vp at Capmark, said: "Clearly there are a lot fewer sources of debt capital in the hotel sector. This is where we were in 2004."
And he warned: "There is a strong chance that things will get worse before they get better." Some potential problems include bond insurers such as AMBAC and MBIA who are facing the loss of billions of dollars as a result of the sub-prime mortgage disaster.
"Capital is being sucked out of our industry to correct problems elsewhere. The fundamentals are good in our industry it's a problem with liquidity that's far broader," said Lowrey.
None of the panellists were prepared to forecast when the current debt woes might subside. But Wayne Brandt, a managing director at RBS Greenwich Capital, said that credit has to regress to its long term mean. He said that the mean level for pricing and availability of credit is roughly where it was in 2002.
"These are long credit cycles. It will take 24 to 36 months to get back to the mean," said Brandt. The current lending market was below the mean and, according to Lowrey, too conservative.
The huge securitised debt backlog, which was estimated at $350bn (across all sectors, not just hotels), is only very slowly being sold down by banks. Brandt said banks could not afford a fire sale on this debt which would be likely to see them get just 90 cents on the dollar.
The gap that has opened up between what lenders are prepared to offer in terms of percentage of the valuation and the amount of equity being put into deals is being filled by mezzanine providers.
But there remained a problem for finding senior debt for even this smaller share, agreed the panellists. And there was a problem in that lenders did not trust the valuations to be a true valuation, repeated de Haan.