Skift Take

The hotel industry qualifies for larger small business loans under the new coronavirus relief measure. That's reason for it to celebrate, but the industry will still need what it considers a real stimulus bill with incentives to revive travel demand in the long-term.

Further details emerged Monday of a $900 billion bipartisan coronavirus economic relief measure announced over the weekend. Congress appeared to deliver several items on the hotel industry’s lobbying wish list.

But the recovery fight is far from over, says the industry’s leading trade group.

“We’re not done yet. There’s much more to do,” said American Hotel & Lodging Association CEO Chip Rogers. “While the Paycheck Protection Program is helpful in creating that bridge to help people travel again, there are still lingering debt issues that will need to be resolved.”

Both sides of the aisle in Congress agreed to provide $284 billion in reopening the Paycheck Protection Program of small business loans. The hotel industry’s top request in recent months was another draw at PPP, as most hotels — despite flag affiliation with a major brand like Marriott or Hilton — qualify as small businesses.

Businesses that took an initial PPP loan and can prove their revenues fell by at least 25 percent will qualify for a second loan under program guidelines.

There is further reason to celebrate the second round of PPP, as Congress increased maximum loan amounts specifically for the hotel and restaurant industry to 3.5 times a small company’s average monthly payroll, according to the AHLA. It was set at 2.5 times a company’s average monthly payroll under the first round of PPP passed in the $2 trillion CARES Act relief measure in late March.

“On the PPP, it’s a home run. It’s about as good as we could have asked for, especially the 3.5 [times payroll],” Rogers said. “That’s a 40 percent increase.”

The bill comes at a critical time for hotel workers. U.S. hotel unemployment during the pandemic fell from a high of nearly 49 percent in April to 21.5 percent last month, but that’s still well above the 6.7 percent national average.

Analysts expect unemployment to creep back up due to rising case counts and travel advisories deterring leisure travelers during the winter months.

The bill also provides an expanded employee retention tax credit and a one-year extension for troubled debt restructuring relief initially passed in the earlier round of relief. The extension enables banks to provide additional forbearance and flexibility with lenders like hotel owners through the end of 2021.

But the bill doesn’t offer much in addressing commercial mortgage-backed securities, a group of mortgages pooled as one that developers frequently use to build new projects. The hotel sector has been the largest source of delinquent CMBS loans during the pandemic.

The bipartisan deal also failed to address proposed tweaks to the Main Street Lending Program, which offers low interest loans to small businesses but largely shut out the hotel industry due to debt caps. Hotel owners typically carry higher debt loads due to their mortgages.

“On the debt side, I would say [the deal is] a mixed bag,” Rogers said.

Congress also left out another of the hotel industry’s relief requests: liability protections against coronavirus exposure claims.

Hotel analysts and executives earlier in the pandemic cautioned there was a need for federal liability protections, as small businesses were vulnerable to exposure claims in a country as litigious as the U.S. But that wave of lawsuits has yet to materialize.

Given the growing number of states that passed liability protections over the course of the pandemic, analysts didn’t expect excluding a federal provision to be a dealbreaker on Capitol Hill. Measures like more PPP funding and debt relief were more important.

“While the liability shield would benefit hotels, it is not the most pressing need,” Ben Tschann, a partner in Goodwin’s real estate industry group and the law firm’s hospitality and leisure practice, told Skift last week. “The lack of government action on employee-retention incentives, debt-relief or forbearance programs and the union demands is likely to result in hotels not being able to re-open, at which point the liability shield is meaningless anyways and jobs are less likely to be replaced.”

More states, including Texas and Florida, are expected to pass their own liability protections in the new year, Rogers added.

There has been a semantics battle among political observers over labeling the CARES Act and the latest deal in Washington as stimulus. Many see this more as relief than jumpstarting business, but Rogers still sees some elements of stimulus in the bill like making business meals in restaurants fully deductible through 2022.

“That helps in the realm of travel and even local restaurants, and it’s a sign they understand tax policy can help encourage certain economic activity,” he added. “We certainly want to use that with a new administration and new Congress to talk about those things that can encourage people to travel.”

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Tags: ahla, coronavirus, coronavirus recovery, economic recovery, economic stimulus

Photo credit: A second draw of the Paycheck Protection Program and higher loan caps are major victories for the hotel industry in the next round of pandemic relief. MichaelJLocke / Wikimedia

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