Time is ticking for the U.S. hotel industry to convince Congress to deliver industry-specific aid similar to what the airline industry received. Continued high unemployment and suspended operations at hotels are why Washington should listen.
Executive and lobbyist eyes from across all industries are on Washington this week, as the House and Senate ramp up talks on another coronavirus relief package.
For the hotel industry, whatever legislation results is poised to be the final economic shot in the arm before summer leisure travel — currently propping up the struggling industry — dissipates in the fall and voters head to the polls for the 2020 presidential election.
“If they’re not able to get something done, we’ll have a serious problem on our hands,” American Hotel & Lodging Association CEO Chip Rogers said. “As people stop taking vacations [in the fall], if there’s no business travel and a lot of forbearance and forgiveness — which is usually offered in 90-day terms — come due, expenses will go up, and revenue will go down in a scenario where many are already struggling to break even.”
The AHLA announced Tuesday morning a list of key measures the U.S. hotel industry needs to survive. The hotel industry seeks a much-needed financial life raft to buoy through the next few months until a vaccine is in mass production and gives corporate event and convention bookers — key business lines for some of the nation’s largest hotels — confidence to once again start reserving rooms.
While the U.S. Travel Association put a $23 billion cost on its own federal relief wish list Friday, the hotel industry’s leading advocacy group is focusing more on policy than price.
The AHLA wants an extension to the Paycheck Protection Program, a federal small business loan initiative incorporated into the original $2 trillion Cares Act relief measure passed in late March. Roughly $130 billion remained in the program at the end of its initial June 30 deadline. The AHLA would like to see a program extension target funds to be distributed to industries hit the hardest by the pandemic, especially hotels.
The industry group also wants a hotel-specific relief fund with respect to commercial mortgage-backed securities, a group of commercial mortgage loans pooled as one that many hotel developers used to build properties. The U.S. CMBS delinquency rate saw its highest increase on record in June, and hotels were the biggest source of delinquent loans.
Hotel-friendly changes are also needed to the Main Street Lending program, the AHLA argues. This $600 billion measure enacted by the Cares Act aimed to keep capital flowing to small and medium-sized business with as many as 15,000 employees. The program currently has debt caps that render a real estate-heavy industry like hospitality almost universally unqualified, due to mortgage debt most hotel owners carry.
“The limitations are too low for private borrowers,” Pebblebrook Hotel Trust CEO Jon Bortz said. “It hasn’t really been used because it has some structural problems and is hard to be used by any kind of real estate.”
The AHLA is also seeking tax incentives for hotels making capital expenditures to abide by the organization’s Safe Stay heightened health and cleaning initiative as well as liability protections for hotels against coronavirus exposure claims. There is fear that, without a federal protection, the hotel industry is vulnerable to coronavirus exposure lawsuits at a time when owners are struggling to keep the lights on.
“There is a cottage industry of plaintiff attorneys who will usually send letters to small business owners who typically don’t have a general counsel on staff first,” Rogers said. “There’s no way to prove you got coronavirus in any business. The fact you have to go to court and defend it, a lot of people would rather write a check and make the problem go away. Today, not too many hotel owners have the money.”
Tweak to Perfection
Elements of the Cares Act have come under scrutiny with respect to who may have benefitted while others were left empty-handed. This next round of stimulus should be about narrowing the scope to industries and businesses most impacted by the pandemic.
“What they passed [in March], hats off to them for doing it so quickly, and the vast majority of it worked well and was helpful for our industry, certainly to parts of the industry,” Bortz said. “The bridge and that runway need to be a lot longer than was originally constructed to avoid significant, long-term structural damage to the travel industry, which includes hotels. I think they recognized that with the package they delivered to the airline industry.”
Recognizing the airline industry is viewed more as a public utility than the hotel business, Bortz added there is still plenty of community-building and public service offered from the hospitality industry. But at the moment, the industry continues to struggle.
More than half of Pebblebrook’s 54 hotels remain closed due to limited travel demand, and roughly 80 percent of the employees who normally work across the portfolio are still unemployed, Bortz said.
“I think there’s a very good understanding in Congress in what ails our industry,” he added.”It’s not an industry crying wolf. It’s been devastated.”
Skift reached out to representatives with hotel brands like Marriott, Hilton, Hyatt, Wyndham, and Choice Hotels on their own stimulus needs. Their respective spokespeople either declined to comment or said the AHLA would speak on their behalf.
Strike A Deal
The Republican-led Senate is slated to unveil a relief bill later this week, expected to cost around $1 trillion and include payroll tax cuts as a business incentive. A $3 trillion bill the Democratic-led House passed in May includes extending unemployment benefits and another round of stimulus checks for individuals.
Political analysts expect a deal to be reached sometime in August, but Rogers would prefer to see something passed in time for when the federal government’s extra $600 in unemployment benefits expires at the end of July. Nearly five million U.S. leisure and hospitality jobs have been lost since February, according to the U.S. Bureau of Labor Statistics.
While hospitality jobs have rebounded during the summer travel season, the hotel industry’s unemployment rate is currently just over 43 percent.
“I think the crisis will be when the $600 federal unemployment benefit runs out. Not too long after that, they’ll need to find a solution,” Rogers said. “That’s the political pressure that gets the deal done.”
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Photo credit: The U.S. hotel industry's leading lobbying group outlined Tuesday key measures it wants included in the next round of coronavirus economic relief. USCapitol / Flickr