Facing deep cuts, industry braces against COVID-19 impact

Pebblebrook Hotel Trust has suspended operations at a majority of its hotels, including Hotel Zoe Fisherman’s Wharf in San Francisco. Photo credit: Hotel Zoe Fisherman’s Wharf (Pierri joins the hotel team with close to three decades of hospitality experience, previously serving as director of operations at Destination Hotels’ Sunriver Resort in Bend, Ore.)

In a statement put out March 21 in support of the Coronavirus Aid, Relief, and Economic Security Act, American Hotel & Lodging Association President/CEO Chip Rogers estimated half of all U.S. hotels will cease operations by the end of March. Already, he said, the association expected 70 percent of hourly hotel employees were no longer working.

In the past week, major hotel companies, including Marriott International, Hilton, IHG and Best Western Hotels & Resorts, have discussed hotel closures and their plans to mitigate the impact they will have on their employees and bottom lines.

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Marriott International Plans to Mitigate COVID-19

Following reports of closing hotels and furloughed workers, Marriott International outlined its plans for the COVID-19 pandemic last week. Measures included delaying all regular cycle renovation by one year, suspending brand-standard audits, reducing marketing costs and suspending and reducing salaries for members of the executive team. At the time, President/CEO Arne Sorenson said there were hundreds of hotels that were either closing or looking at closing.

Hilton Connects Furloughed Employees with Jobs

After reports of furloughs at Hilton last week, the company on March 23 announced plans to help workers from temporarily suspended hotels find short-term work. According to the company, the Hilton Workforce Resource Center will connect workers with hundreds of thousands of jobs created by the pandemic. Participating companies include Amazon, CVS and Albertsons.

Best Western Implements Relief Measures

Late last week, Best Western Hotels & Resorts implemented several measures to provide relief to its members during the COVID-19 pandemic. These included waiving half of monthly fees, half of property revenue-management fees and 100 percent of BWHR's co-op marketing fees. The company also reduced by one half loyalty-point fees charged to members without lowering points awarded to program participants, increased by 50 percent hotel redemption compensation for loyalty guest stays and reduced the compensation of the company’s board of directors and executive team.

IHG Reduces Spending as it Predicts RevPAR Decline

On March 20, IHG offered a business update and outlined several measures it was taking to respond to COVID-19. The company predicted a 60 percent decline in global revenue per available room in March, with cancellation activity and booking trends indicating continued challenging conditions. In response, the company reduced the salary and incentives of its board and committee members, reduced marketing spend, delayed renovations, relaxed brand standards and reduced its gross capital expenditure by around $100 million.

Pebblebrook to Close Vast Majority of Hotels

Among those hotels suspending operations will be the vast majority of Pebblebrook Hotel Trust properties. The REIT provided a business update March 23 outlining its plans to mitigate the impact of the COVID-19 pandemic.

As of March 22, Pebblebrook said it had suspended operations at 28 hotels. It expected to suspend operations at most of its remaining 26 properties by March 30. Additionally, Pebblebrook said its asset managers were working to significantly reduce operating expenses and conserve cash over the immediate period.

Pebblebrook's plans to conserve money included postponing $50 million in nonessential capital investments, conserving $50 million by reducing its regular quarterly common dividend, drawing down $643 million on its $650 million unsecured credit facility, reducing compensation for its executive officers and board of trustees, reducing employee salaries corporationwide, forfeiting cash bonuses in lieu of shares and reducing corporate operating expenses.

In a call with the media following a meeting with President Donald Trump, Jon Bortz, chairman/president/CEO of Pebblebrook Hotel Trust and AH&LA board chair, said the company had laid off 4,000 of its 8,000 employees with plans to lay off another 2,000 by the end of the month.

“In the coming weeks, we and our hotel operating partners will be working on our plans to reopen and ramp up our hotels and resorts as soon as conditions improve, and we look forward to welcoming back our property associates at that time,” Bortz said in a statement.

Other REITs ‘Shrink’ Properties

On March 18, DiamondRock Hospitality Co. announced its plans to mitigate the financial impact of COVID-19. In order to reduce costs at each of its hotels, the REIT said it was proactively “right-sizing” hotels to match demand levels so as to reduce costs and maximize efficiency. Other efforts included suspending operations at hotel restaurants and outlets where demand was insufficient and local prohibitions did not permit social gatherings and canceling or deferring the vast majority of its capital expenditures. At the time, DiamondRock noted a negative impact of $23 million from cancelations.

Related Story: How hotel REITs have quantified COVID-19’s impact so far

On March 16, Park Hotels & Resorts said it would temporarily be suspending operations at certain hotels and, in some cases, suspending operations within a portion of the hotel so it could be operated more efficiently. It added it would temporarily be suspending operations at select restaurants and outlets where there was insufficient demand. In terms of capital expenditures, it said it would be implementing cancelations and deferrals on $130 million of Park’s previously planned $200 million capital program for 2020.

Disney Closes Parks, Hotels

Earlier this month, Walt Disney Co. announced the planned closures of its Disney Parks locations in Anaheim, Calif.; Orlando; and Paris in response to the impact from novel coronavirus. At that time, it only announced plans to close the hotels at Disneyland Resort in Anaheim on March 16. Early last week,-the company announced its owned and operated hotels at Walt Disney World Resort and Disney’s Vero Beach (Fla.) Resort will close, too. The company kept them open until March 20 to allow guests to make other arrangements.

Casino Companies Close Properties

As states across the U.S. ordered casinos to close, several companies ended up closing most to all of their properties.

As of March 17, MGM Resorts International had suspended operations at all its U.S. resorts.

Related Story: Marriott extends furloughs to corporate employees

That same day, Caesars Entertainment Corp. announced it would temporarily shut down its owned properties in North America, consistent with directives from various government bodies. The company said it was committed to helping employees manage the impact, but did not offer specifics. Though it noted it had $2.8 billion of cash on hand, it said it was taking measures to reduce operating and capital expenses as necessary.

On March 20, Hard Rock International announced plans to temporarily close select Hard Rock Hotel and Hard Rock Hotel and Casino locations in the U.S. and abroad. Hard Rock said it would pay employees at company-owned locations for two weeks following the closure date. Known closures include the Seminole Hard Rock Hotel & Casino Tampa and Seminole Hard Rock Hotel & Casino Hollywood, both in Florida.