As the COVID-19 pandemic continues claiming lives and livelihoods, hotels across the U.S. began furloughing workers and closing doors. In response, industry associations and organizations have stepped up efforts to secure federal support for affected businesses.
On Friday, more than 6,000 travel industry and related organizations sent a joint letter to congressional leadership requesting aggressive and immediate financial relief, noting the interrelated industries support 15.8 million American jobs. According to research prepared for the U.S. Travel Association by Tourism Economics, 4.6 million of those jobs could disappear in the coming weeks because of the virtual shutdown of travel.
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The American Hotel & Lodging Association reported hotel occupancy rates were below 20 percent in some major markets, including Seattle; San Francisco; Austin, Texas; and Boston. The association calculated that 4 million total hospitality jobs have been eliminated already or are on the verge of being lost in the coming weeks, and 44 percent of hotel employees in every state are projected to have lost or lose their jobs. A full 70 percent of hourly hotel employees were no longer working, and AHLA predicted half of all U.S. hotels will cease operations by the end of March.
“This is really all about liquidity,” said Cecil Staton, president/CEO of AAHOA. “Hoteliers’ liquidity crisis is directly related to the fact that our occupancy rates have dropped from as much as 80 percent on average, all the way down to below 10 percent. And when your occupancy is down below 10 percent there's no way you can afford to keep all of your staff or make your mortgage payment as well as your other recurring costs.”
CARES and Caring
Senate Majority Leader Mitch McConnell (R-Ky.) proposed the Coronavirus Aid, Relief, & Economic Security Act, a bill to help keep businesses afloat with special provisions in place for small businesses—a category that AH&LA President/CEO Chip Rogers said includes 61 percent of hotels. An expanded version of the bill was approved early on Wednesday morning, and while the exact text of the $2 trillion deal had not been disclosed as of press time, Senate Minority Leader Charles Schumer (D-N.Y.) sent a letter to Democratic Senators highlighting some details, including $10 billion for Small Business Administration emergency grants of up to $10,000 to provide immediate relief for small business operating costs.
According to the New York Times, the bill provides federally guaranteed loans available at community banks to small businesses that pledge not to lay off their workers. The loans would be available during an emergency period ending June 30, and would be forgiven if the employer continued to pay workers for the duration of the crisis.
Key among the bill’s provisos (as of Tuesday) is a loan of up to 2.5 times monthly payroll costs to help small-business owners meet their expenses. “In other words, if you look at your [monthly] payroll, annualized, as a small-business owner, you would be able to borrow up to two and a half times that amount,” explained Staton, noting the money could go for mortgage payments and any other recurring costs. And while something is certainly better than nothing, Staton does not believe the 2.5-times cap is adequate, especially given the likely scope of the pandemic. “That would probably give most of our hotel owners maybe 60 and in a best-case scenario 75 or 90 days worth of resources or liquidity to keep their doors open,” he said.
If the loan was retroactive to the beginning of March, he said, the funds would only cover expenses that need to be met through the end of April, and the crisis may still be ongoing at that time. Instead, he said, AAHOA is asking the bill to be amended so that the multiplier covers four months of all operating costs with a cap of $10 million. “For most of our members, their operating expenses on a monthly basis are going to be lower than that for an individual hotel,” he said, noting a loan to cover four months of all expenses would support all workers through the end of June. “We want our hoteliers to be able to survive and be there on the other end of this.”
Grants vs. Loans vs. Insurance
For his part, Rogers disagrees with the idea of loaning hoteliers funds at all. “What they need is access to capital,” he said. “They don't need additional loans, because why would you pile on more debt on top of the debt you already have?” The current structure of the bill would forgive a portion of the loan if the funds are used to pay current employees, pay utilities and service any other debts, he noted. “So it would act as a grant, if in fact you use it for those purposes, and we think most owners will be OK with that,” Rogers said. “It's certainly a lifeline that they don't have right now. So every little bit helps.”
Perhaps one of the most important things legislators at both the local and federal level could do, Rogers said, would be to give furloughed workers access to unemployment insurance. Since furloughed employees are technically still employed, they often cannot access these benefits and may have no other income, and a typical requirement of collecting unemployment insurance is proof that the collector is seeking employment elsewhere, creating a catch-22. If furloughed workers have instant access to unemployment benefits, he said, many workers will be protected until business can resume as normal.
Staton, meanwhile, expressed irritation at the amount of time Congress is taking to release funds to workers. “The delays are harming Americans,” he said. “They're harming employees. It's harming small business people who are trying to keep the lights on, make payroll, and pay for the mortgage, just like all small business people do. So our word is really a word of encouragement to the officials: Don't play politics with this. It's not the time. This crisis is real. And if we don't see some help very soon there, you're going to have an economy that is littered by small business people who will have lost their businesses, who will have gone out of business. And therefore people will be unemployed, and it will take a much longer period of time to get this economy going again than it would if we give them some help. Make that investment and get through this thing together, and come out so that there's a potential for strength on the other side.”