Hotels ask for $250bn

White House

Hotel executives told Donald Trump that occupancy rates could fall as low as 10% globally as the movement of people was restricted as a result of the spread of COVID-19.

The comments were made as industry leaders met with the US president to discuss a bailout totalling $250bn.

The proposed package would include $150bn to allow hotel owners to continue to make loan payments and support employees who are being laid off and $100bn to go to suppliers.

Hilton CEO Chris Nassetta said: “We’re one of the biggest industries in the country. We’re one of the biggest employers in the country. And our industry has been impacted in a devastating way.

“I personally lived through many crisis. I’ve been doing this for 35 years. Never seen anything like it.  We’re hoping to have a constructive dialogue about how we protect the small businesses that make up the bulk of this industry and how we protect the people on the frontlines of this industry -  five million people.’

Nassetta said that, within a few days to a week he anticipated Hilton’s hotels running at 10% to 15% occupancy around the world. He said: “If you look at the major cities around the US, they’re running in the single digits. Hilton has been around 100 years and we’ve never closed a hotel that wasn’t going to be demolished for rebuilding.  The bulk of our hotels in the major cities are closing, as we speak.”

Nassetta suggested creating a fund to stop employees from being laid off, describing the industry’s  quarterly payroll as $45bn.

Marriott International president & CEO Arne Sorenson said that the company was starting to see “some green shoots” in China, where occupancy had bottomed out at around 2%.

Sorenson told Trump: “I don’t think we’ve bottomed anywhere else yet.” He said that the company was asking for “employees first, and liquidity second”.

Elie Maalouf, CEO, Americas, InterContinental Hotels Group, said: “We want to turn our attention to those small business owners in 50 states across the communities because they’re the bedrock of those communities.  And as they’re getting impacted, it’s not just their employees that begin to see an impact in job losses, but it’s an entire ecosystem of their suppliers, their vendors.”

Pat Pacious, CEO, Choice Hotels International, added: “We may be the only hotel in a small town.  Those owners have two key concerns: one, what do they do with their employees when they’ve got zero occupancy?  And two, how do they pay their mortgage?  So it is this question of employee retention and liquidity so that you get through this period.”

Chip Rogers, CEO, American Hotels and Lodging Association, said: “Industry wide, last year, occupancy was 67%.  That helped support 8.3 million jobs.  Right now, as these gentlemen have indicated, we’re probably under 20% nationwide and headed south.

“If, by the end of the year, we get up to 35% and if nothing else happens, that’ll be about 4 million jobs lost.  That’s if we can get back up to 35%.”

Roger Dow, U.S. Travel, concluded:  “I would like to put together what everyone has said here.  The numbers are $355bn is what we’re going to lose, 4.6 million employees will be out of work, and we’re predicting unemployment will go to 6.3%.  So, it’s now - it’s serious.”

Trump responded: “No, I know. We’ll work on it.”

 

Insight: In the opening to this meeting, Trump said: “We know that your industry is among the hardest hit by the economic impact of the virus.” And that is music to the sector’s ears. And this hack has not, during the tenure of The Donald, found much music in his utterances.

There is every chance that the $250bn will be forthcoming and it’s not hard to work out why: Trump has a hotel business. When he was inaugurated many in the sector chuckled over their good fortune in having a hotels man in the top seat. Then his administration started locking kids in cages and there was a lot of what we now call social distancing. Now it’s a case of beggars can’t be choosers.

Key now will be where to place this $250bn. Marriott has begun to furlough tens of thousands of employees, with workers not being paid but will get healthcare benefits. Being on a zero-hours contract means no claiming unemployment benefit. Marriott is not alone, the other operators are following suit. But $100bn will pay wages for two quarters.

But the picture in the sector gets more complex once move past wages. There have been criticisms of the large operators, that they have not been saving when times were good. But the reality is that the branded operators are just the public faces. Often they are not the employers, merely the recipients of fees.

One of the reasons we have seen such massive growth and investor interest in the sector is that the stack within a hotel has many points of interest, many of whom go nowhere near a hotel. Small owners, large owners, third-party operators. The solution must lead with employees then account for multiple stakeholders, when the collapse of any one could bring the house down.

We don’t have Trump in Europe. But we do have a voice. Join us here to make it louder: https://www.surveymonkey.co.uk/r/QuestexHospitality-SolidarityPledge