Travel industry seeks $150b in aid as demand evaporates
 
Travel industry seeks $150b in aid as demand evaporates
18 MARCH 2020 8:50 AM

Executives from AHLA, USTA and two hotel companies discussed the severity of coronavirus (COVID-19) on the travel industry and economy as a whole. Industry executives are seeking direct grants totaling $150 billion from the White House to offset losses.

WASHINGTON—To date, the novel coronavirus (COVID-19) has already had a “more severe” economic impact on the hotel industry than any other monumental events in modern U.S. history including 9/11 and the Great Recession combined, according to Chip Rogers, president and CEO of American Hotel and Lodging Association.

The travel industry is now seeking $150 billion in direct grants from the White House “in overall relief for the broader travel sector,” according to a news release from the U.S. Travel Association. The release states the $150 billion would go toward:

  • establishing a “Travel Workforce Stabilization Fund;”
  • providing an “Emergency Liquidity Facility for travel business;”
  • and optimizing and modifying SBA loan programs that would support small businesses and its employees.

On a press call Tuesday, AHLA, USTA and hotel CEOs addressed the “catastrophic” economic impact on the hotel industry, its employees and the U.S. economy, after meeting with the White House earlier in the day.

“Hotel occupancy has fallen to staggering levels not seen before, of somewhere between 10% and 20% in major markets nationwide,” Rogers said. “We would expect this would mean 140 million rooms or more could be empty in the next 30 days alone.”

If yearlong occupancy rate remains at about 30%, the hotel industry estimates four million jobs could be lost in 2020. That equates to $180 billion in wages and a $300-billion hit to the national GDP, he said.

“This is crippling to the hotel industry and the local communities they serve as well as the U.S. economy,” he said. “Given these unprecedented circumstances, the urgent steps we have recommended for the White House and Congress are more important today than ever.”

Rogers said the meeting with President Donald Trump, Vice President Mike Pence and members of the Cabinet was productive and the administration was receptive. Rogers said there are two main focus areas where the industry is asking for help: ensuring employees are financially secure and that owners and franchisees can pay their bills.

“If we do see a recovery in the near term that may or may not happen—we’re certainly hoping it happens—we need these employees when people come back to hotels,” he said.

Rogers cited small-business hoteliers as a particular group that needs “critical relief” so they can continue to stay open and retain employees.

Breaking down the numbers
Roger Dow, president and CEO of USTA, speaking on behalf of the entire travel industry—which includes transportation, lodging, retail, attractions, restaurants and the conventions and meetings business—said the industry is facing a “catastrophe that is sudden and needs to be fixed suddenly.”

He said the industry is projecting a loss of 4.6 million jobs this year, taking the economy from 3.3% unemployment to 6.3% unemployment. He said this would “put us in a recession.”

One in 10 Americans are employed in the travel industry, Dow said.

The talk of recovery will be important for the future, but right now the focus is on keeping people working and keeping businesses operating across the travel industry, he said.

Dow said that will take “several hundred billion dollars.”

While $150 billion sounds like a large number, he said the contrast to what can be lost and what’s at stake in the U.S. economy results in that figure being a necessary number.

Rogers said he isn’t sure about what the distribution of money to employees would look like just yet, but his desire would be to make sure they are “compensated as well as we possibly can.”

“At this point it would be fantastic if an employee could maintain their full salary. If not, it’s a large portion of their salary somewhere between full salary and what they would receive in unemployment benefits,” Rogers said.

Dow said AHLA and USTA are asking for this money through direct grants due to the urgency.

“Our estimates are that we’re going to lose—as an industry in the very short term—$355 billion, so I want to put into perspective how serious this is,” he said.

Closing hotels will cause a ripple effect, Rogers said.

“If you go back just three weeks ago, most of the industry was looking around and happy to see record high occupancy rates, record high employment rates, and in a matter of three weeks we’re now faced with the reality that half the hotels in the United States may close during this year,” he said.

  • For more coverage on COVID-19 impact, click here.

Hotel CEOs’ perspectives
Jon Bortz, president and CEO of real estate investment trust Pebblebrook Hotel Trust and AHLA board chair, said on the call that his hotels are in the hardest-hit cities of the U.S., including Seattle; Washington, D.C.; San Francisco; New York City; Boston; Chicago; and more.

Pebblebrook has 54 hotels, more than 13,000 rooms and more than 8,000 employees across the U.S., he said.

“As of the most recent week, due to occupancies dropping into the single digits, we have had to make a difficult decision to let go over 4,000 employees—half of our total employees,” he said.

By the end of March, with occupancy levels expected to further decline, he said his company expects another 2,000 employees will be let go. Pebblebrook is also looking at closing doors at more than half of its properties, he said.

“This is the reality we, and countless other owners and operators, around the country are facing in the wake of this public health situation and the effective elimination of demand,” Bortz said. “Today, we asked the White House to take immediate action, providing solutions focused on protecting millions of jobs by providing relief to our small business operators and franchise owners.”

Solutions that hoteliers, AHLA and USTA have suggested include keeping people employed and the economy moving by retaining and rehiring employees as well as keeping hotels from shutting down “through access to liquidity, low-interest loans including for small business,” Bortz said.

Doug Dreher, president and CEO of Edmonds, Washington-based The Hotel Group, also owns properties across the U.S. with a large concentration across the state of Washington. He said the situation is “really bad out here, and it’s been right from the beginning.”

The Hotel Group has six hotels in the Puget Sound area and 20 nationally. His company felt the impact right after Seattle-based Amazon announced it was suspending employee travel.

“We’ve gone from 80% occupancy to the single digits,” he said. “Today, we’ll be suspending the operations in one of our Hilton-branded hotels with two others coming.”

He said one-third of his workforce will be let go in the immediate term. Dreher, along with other execs, are trying to get ahead of the situation by working with lenders, “but we need help,” he said.

“It is, for us, the Great Depression,” he said.

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