Industry asks Trump for relief as demand plummets

Hotel and travel leaders met with President Donald Trump, Vice President Mike Pence and Commerce Secretary Wilbur Ross March 17 to discuss relief packages for the industry as COVID-19 threatens millions of jobs.

American Hotel & Lodging Association President/CEO Chip Rogers; U.S. Travel Association President Roger Dow; Jon Bortz, chairman/president/CEO of  Pebblebrook Hotel Trust and AH&LA board chair; and CEOs from several other major hotel companies asked the White House for $150 billion for hotels and $100 billion for travel-related businesses, largely to provide relief for employees.

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“It sounds like a big number but contrast to what can be lost and what’s at stake in the U.S. economy, it’s a necessary number,” Dow said in a call with the media following the meeting.

The U.S. Travel Association estimates COVID-19 could eliminate 4.6 million travel-related American jobs, raising the U.S. unemployment rate from 3.5 to 6.3 percent. Based on the AH&LA’s current estimates, approximately 1 million direct hotel jobs—or 45 percent of all hotel jobs—have either been eliminated or will be eliminated in the next few weeks.

Leaders asked for the government to act quickly. “From major cities to Main Street USA, our 33,000 small-business hotels across the country are facing the difficult decision right now whether to close their doors and lay off millions of people over the next few days,” said Rogers. “Not weeks, not months, but days.”

According to Bortz, the industry is asking for relief to come just that quickly: in days. “This can’t happen fast enough,” said Bortz. “This has occurred so quickly. I can tell you as an owner of hotels across the country that where we thought we were a week ago is dramatically different today.”

A Sobering Reality

According to Rogers, COVID-19 already has had a more severe economic impact on the hotel industry than 9/11 and the 2008 recession combined. “Hotel occupancy has fallen to staggering levels not seen before of somewhere between 10 and 20 percent in major markets nationwide,” said Rogers.

“If you go back just three weeks ago, most of the industry was looking around and happy to see record high occupancy rates, record high employment rates, and in a matter of three weeks, we're now faced with the reality that half the hotels in the United States may close during this year and that the occupancy rate drops to somewhere in the 30 to 35 percent [range] for the entire year,” said Rogers.

Bortz said Pebblebrook Hotel Trust—a real estate investment trust with 54 hotels and more than 13,000 rooms in some of the country’s largest cities—has had occupancy dip into the single digits. As a result, the company has had to let go of more than 4,000 employees. By the end of the month, the REIT expects another 2,000 employees will be let go. The layoffs would represent more than three-quarters of Pebblebrook’s employees. The company, Bortz said, expects to close more than half of its hotels.

“This is the reality we and countless other owner and operators around the country are facing in the wake of this public health situation and the effective elimination of demand,” said Bortz.

The Hotel Group has six hotels in the Seattle-Puget Sound area and 20 nationally. President/CEO Douglas Dreher said the company has gone from 80 percent occupancy to the single digits. It planned on suspending operations at one of its Hilton-branded hotels Tuesday, with two others coming. A third of the company’s workforce, he said, will be let go in the immediate term.

“It is for us the Great Depression,” said Dreher, who was on the call with media, but did not meet with Trump. “We’ve tried to get ahead of it, we’re working with lenders, but we need help. We need help in every imaginable way. The human toll breaks your heart.”

“It is as bad as we have ever seen it in our professional lives,” said Rogers.

Relief for Workers

According to Rogers, the resources the industry is asking for are to keep employees on the payroll. “I think it’s important to note, as we talk about what will happen to these millions of people, if they go on unemployment, somebody is going to be paying—the government will be paying them—through one mechanism, or we can keep them employed and also pay them. And so, I think the preference, for at least to us, it makes sense to keep them employed; let's get past the health risk as quickly as possible and let's get these businesses open again so that the economy goes back to where it was when it was very strong.”

How much these employees would be paid remains up in the air. Rogers said the desire would be to compensate them as well as possible. “At this point, it would be fantastic if an employee could maintain their full salary,” said Rogers. “If not, a large portion of their salary somewhere between full salary and what they would receive in unemployment benefits. But we need to make sure that those folks are economically viable and, again, get back to work as quickly as possible.”

Rogers also added that part of the relief would be intended for hotel owners so they can make their mortgage payments.

Meeting with the President

According to Dow, travel and hotel industry leaders have been meeting with Congress, the Centers for Disease Control and Prevention, the National Institutes of Health, the U.S. Department of Homeland Security and the U.S. Treasury Department over the past few weeks. Tuesday’s meeting with Trump, he said, was the first time they have spoken directly with the president.

Rogers said Trump “fully understands” what the hotel industry is facing and that he and Pence were both “very receptive” to what he and the other leaders had to say. “I think their message is we need to get past the health crisis as quickly as possible, but simultaneously understanding the financial crisis that is at our doorstep,” said Rogers.

“The message I heard was he’s going to act big, fast and immediate,” said Dow. “[Secretary of the Treasury Steven] Mnuchin is working with the Senate right now and he also spoke about [how] this is finally an opportunity where Congress is working together and pushing things quickly and I think that's very important.”

By the Numbers

During the leaders’ meeting with the White House, Dow presented direct impact numbers prepared for the U.S. Travel Association by Tourism Economics. In its analysis of this data, the USTA made the following predictions:

  • Coronavirus will inflict an $809 billion hit on the U.S. economy and eliminate 4.6 million travel-related American jobs.
  • Total spending on travel in the U.S.—including transportation, lodging, retail, attractions and restaurants—is projected to decrease by $355 billion for the year, or 31 percent. According to the USTA, this is more than six times the impact of 9/11.
  • The estimated losses by the travel industry alone will be enough to push the U.S. into a protracted recession. The USTA expects the recession will last at least three quarters, with Q2 2020 being the low point.
  • The projected 4.6 million travel-related jobs lost would, by themselves, nearly double the U.S. unemployment rate from 3.5 percent to 6.3 percent.

The AH&LA offered some insight into the hotel industry specifically. Given the current impact of COVID-19 on travel demand, the hotel industry is losing $1.4 billion in revenue every week, said the association. Based on current estimates, approximately 1 million direct hotel jobs—or 45 percent of all hotel jobs—have either been eliminated or will be eliminated in the next few weeks.

According to the AH&LA, the U.S. hotel industry supports 8.3 million jobs across the country and provides $660 billion in gross domestic product. The 33,000 small business hotel operators and franchise owners represent 61 percent of the industry, said the association.

Industry Leaders React to COVID-19

In a press release from the AH&LA, several hospitality leaders offered statements stressing the severity of the industry’s current situation.

David Kong, Best Western Hotels & Resorts president/CEO: “For nearly 75 years, Best Western has been a brand with small family businesses at our core. Most of our hotels are owned and operated by hardworking men and women with their children growing up in the business. For them, their hotels represent their families’ legacy and their future. Many are being forced to close their doors with no assurance of when they will be able to reopen. Their employees are left with no gainful employment and the resultant financial hardship. It is imperative that the government step in immediately with loan programs that provide capital and liquidity to help small businesses survive as well as other employment programs to help the impacted employees. The situation is dire.”

Pat Pacious, Choice Hotels International president/CEO: “The majority of our 13,000 franchisees are small-business hotel owners who have to meet payroll, pay their mortgages every month and support their families during this crisis—as well as take care of their guests. As I told the administration today, while Choice Hotels is acting to assist our franchisees, the federal government has a critical role to play in helping minimize the impact and disruption to the livelihoods of small-business hotel owners and their employees, as well as stabilizing the economy during this difficult and unprecedented time.”

Christopher J. Nassetta, Hilton president/CEO: “In Hilton’s 100-year history, we have never seen anything like the current situation. I am hearing directly from hotel employees concerned about their mortgage payments and hotel owners worried about making payroll. Nearly 80 percent of the hotels in our U.S. network are franchise properties that employ less than 50 people, and we are using every tool in our toolkit to keep these small businesses viable. Ours is an industry of people serving people, and that’s why we’re asking Congress and the administration to help shield them from the economic impact of the coronavirus, so they can be part of the recovery that will follow.”

Mark Hoplamazian, Hyatt Hotels Corp. president/CEO: “In our industry, success depends entirely on the passion and dedication of our people. It is critical that we take swift action to ensure that our workforce is protected with the proper healthcare and financial support so that the industry can return in full force following this unprecedented degree of business interruption.”

Elie Maalouf, IHG CEO, Americas: “The coronavirus represents a global economic emergency as well as a global health emergency, and the impact it will have on the hospitality industry is unprecedented. Even as we’re currently managing this issue to keep our guests and colleagues safe, and hotel owners secure, we’re committed to doing everything we can to protect the future of the millions of Americans employed by the hotel industry and prepare to expedite a return to normal once this crisis passes. We appreciate the administration’s engagement in this issue and look forward to continuing this important discussion in the weeks ahead.”

Arne Sorenson, Marriott International president/CEO: “The COVID-19 pandemic has resulted in an unprecedented decline in demand impacting our hotels and our associates. We are looking to government to support the hospitality industry through this period of time so we can assist our associates and hotel owners, many of whom are small businesses.”

James Murren, MGM Resorts International chairman/CEO: “Within days we have transformed from a vibrant industry welcoming people from around the world to one experiencing a total shutdown of business. Addressing this public-health emergency required major collective action, which is why MGM shut down our operations. But it comes at a cost to our tens of thousands of employees, small businesses and communities who depended on us. We look forward to a productive dialogue on how to ensure that when it is safe, the gaming industry can be in a position to open our doors so that we and the 2 million jobs that depend can be part of the economic recovery that is to come.”