Hotels were among the earliest businesses to feel the economic sting from coronavirus shutdowns and the first to ask Congress for aid, as top executives hurriedly met with President Donald Trump to ask for $150 billion in mid-March.
But less than three weeks after Trump signed the stimulus package into law, hotel owners say they may not even be able to use the funds unless Congress makes changes.
One provision, for instance, requires that hotel owners rehire their staff by the end of June, even though many owners say they have little idea when business will return.
Bookings at her Econo Lodge outside Buffalo, New York, began disappearing in early March, said Julie Stone, a third-generation owner of the property. When business dropped off completely, she laid off 12 of her 14 workers. She has applied for a small business loan from the stimulus package but isn’t sure she could use it if she gets approved.
“If this sickness drags on and on, then I need my people when I am ready to really go back to business,” she said. “It’s not clear that if I get a check tomorrow, is that good? Because I don’t really need them right now because I don’t have any business.”
More than 75% of the nation’s hotel rooms are empty, according to the research firm STR, creating financial shortfalls for the myriad companies that make up the industry: hotel owners small and large; big branding companies including Marriott and Hilton; online booking agencies such as Kayak and Expedia; and banks with lending that enables the hotels to be built in the first place.
Altering the legislation, as the industry’s top lobbying group called for in a letter to congressional leaders April 8, carries its own concerns. Workers and unions say the multibillion-dollar chains that own the hotel brands, such as Marriott and Hilton, are angling to use the $2 trillion stimulus package, called the Cares Act, to prioritize payments to shareholders and Wall Street lenders over workers.
One proposed change in the letter to congressional leaders from the American Hotel and Lodging Association, would allow hotel owners to use more of the stimulus money on fixed costs such as franchise fees, which they pay monthly to the chains, even as workers remain home.
“We’ve been very frustrated with the hotel industry. They were very active lobbying for the Cares Act and yet they haven’t used it to rehire workers,” said D. Taylor, president of the Unite Here union that represents 300,000 workers at hotels, casinos and food service companies.
Taylor said 95% of his members are out of work, some with health benefits but mostly without pay or assurances they will have jobs when travel resumes. Overall close to 4 million of the industry’s 8 million workers are out of a job. Taylor said the companies “want to change some of the rules before the ink is dry on the Cares Act.”
The problems illustrate the difficulty of quickly getting aid to millions of employees in one of the country’s most hardest hit industries. AHLA estimates that the economic impact of coronavirus on hotels will be seven times greater than what followed the Sept. 11 terrorist attacks.
Hotel owners with little or no revenue are struggling to pay fixed expenses such as bank loan payments, utilities and franchise fees to the chain brands. Presently the stimulus package won’t help much with those costs, as 75% of proceeds from the small business loans must be used on payroll in order for the government to forgive repayment.
“We’re supposed to use it for payroll,” said Vinay Patel, who owns seven hotels in Maryland and Virginia, including a Hampton Inn and an Aloft. He said he has kept all of them open but has laid off about 125 people of his 175-person staff because barely any customers are staying at the properties.
Patel and other owners said that staff who are receiving unemployment benefits may be reluctant to come back now even if the stimulus package did pay their wages because of the uncertainty of whether they could return to work long term.
“If you only have 10% occupancy ― I’d love to bring them back, but I would have nothing for them to do,” he said.
When hotel executives including Marriott’s Arne Sorenson and Hilton’s Chris Nassetta met with President Trump at the White House almost a month ago, they focused on workers and hotel owners who could benefit from the small business support, said Chip Rogers, president and chief executive of AHLA.
“One hundred percent of the time we focused on ‘how do we get resources to the employees and how do we get resources to the franchises who own these businesses,'” he said.
Rogers said that remains the focus as the group seeks changes. In his April 8 letter to Congressional leaders, he asked policymakers to push back the time by which operators must rehire the their staffs and to allow them to use up to half of government funds, rather than 25%, toward non-payroll costs such as bank payments, utilities and franchise fees.
“Companies have already incurred substantial financial losses,” Rogers wrote. “Allowing them to use proceeds from the SBA loan/grant to help their businesses recover will hasten their financial recovery and allow them to be able to rehire employees sooner.”
But the program was created to help small businesses pay workers, not to backstop the earnings of Wall Street lenders and corporate hotel chains. Some lawmakers were dubious about helping the industry in the first place because of the dividend payments and share buybacks nearly all the major chains issued in recent years to benefit shareholders, leaving less money to pay workers.
“They’re basically saying that if we have to pay the workers, that will use up the money up that we need to pay off our lenders,” said Taylor, president of Unite Here. He said of the three main industries that employ food service and hospitality workers ― hotels, casinos and food service companies ― hotel companies had been the least generous to workers during the shutdowns.
Since the pandemic outbreak, some of the chains have changed their ways by halting buybacks, delaying dividends and cutting compensation. Marriott, based in Bethesda, Maryland, says it is working to “dramatically reduce costs” on services including marketing for its franchisees and is allowing owners to delay required upgrades and audits.
Hotels have also made more than 15,000 properties available to the Department of Health and Human Services to serve as temporary housing for emergency and healthcare workers.
The chains have made tens of thousands of their own job cuts, from both their properties and their headquarters. Ione Quinn, a 27-year-old certified public accountant from Reston, learned March 26 that she had received a 90-day furlough from the corporate offices of McLean-based Hilton.
Quinn said she was shocked at the news and wasn’t sure she wanted to return to an industry that suffers from such extreme swings.
“I really do like my company and I like my job, so I don’t want to leave,” she said. “But because I don’t know what my financial situation is going to be, depending on how long this lasts, I just won’t have a choice and I may have to go somewhere else.”
Another section of the Cares Act allows larger companies to apply for aid but it’s unclear whether the big chains will take advantage for some of the same reasons as owners: They don’t know when business will return.
Among the executives who met with Trump was Jon Bortz, chief executive of Pebblebrook Hotel Trust, a publicly traded, $1.5 billion company in suburban Maryland that owns 54 hotels in large cities.
Bortz said he understands if American taxpayers don’t want to bail out banks and big corporations but said it won’t help workers if those companies have to scale back dramatically.
“We have an obligation to all of our stakeholders, including all of our employees but also our shareholders, to make sure that the company is there to rehire the employees at the end of the day,” he said.
Bortz said Congress created the Cares Act with good intentions. But industry experts don’t expect the industry to return to some state of normalcy until next year. In the meantime, he said Congress needs to step in again.
“It’s not really going to get done for the hotel industry what the intention was,” he said.