Expert Insight: Thousands of Hotels are on the Brink. Why Won’t Washington Act?

By Cecil P. Staton 

The hotel industry is on the brink of failure. The steep declines in occupancy rates and revenues brought on by the COVID-19 pandemic mired hotel owners in a liquidity crisis. These small business owners are struggling to pay employees and stay current on their commercial mortgages. Thousands of hotel owners sought and received forbearance from their lenders, However, those forbearance periods are coming to an end. With no end in sight to the fallout from the pandemic, these small businesses are facing tough choices. But key economic relief programs in Washington still have hundreds of billions of dollars available to help impacted businesses. Our elected leaders can easily make these funds available to hotel owners and ensure that they come out on the other side of this crisis. My question is, why won’t they?

American hotels are small businesses. In fact, over 90% of them are franchised properties owned by an individual, not a large corporation. Small business owners create the millions of hotel jobs across the country and make significant investments in their communities through development projects and taxes. When the pandemic hit, these owners felt the economic fallout immediately. People stopped traveling. Conventions and meetings were postponed or canceled. Until there is a vaccine, the industry is sitting idle on the road to recovery, and we are about to run out of gas.

The passage of the CARES Act earlier this year helped businesses cover some of their expenses through the Paycheck Protection Program (PPP) and Main Street Lending Program (MSLP). However, it is largely a one-size-fits-all approach to addressing a complex and immense economic crisis. Hotel owners could not get enough money through PPP to cover their expenses, and they could not use the funds to cover significant operating costs, specifically their mortgages. Owners also found themselves frozen out of the MSLP because their hotels are asset-based businesses. Debt service is one of a hotel’s largest expenses, and until Congress and the administration tailor their stimulus programs to address this reality, the industry will continue to barrel towards collapse.

The resources and tools to help hotels is there, all we need is the political will to make it available. In the short run, hoteliers need additional forbearance from mortgage obligations until they can access additional liquidity. The HOPE Act, with nearly 70 bi-partisan co-sponsors, would provide hoteliers with the capital they need through a government-backed preferred equity facility that would address the needs of both conventional and commercial mortgage-backed security loan borrowers. Without addressing the liquidity crisis gripping the hotel industry, Washington is all but guaranteeing that these businesses will fail. Hotels that once offered refuge to first responders and quarantined vulnerable populations may not even remain open come January. Most of the nation’s governors declared hotels to be essential businesses. Why won’t Washington do the same?

Our leaders must expand eligibility for the MSLP to include asset-based businesses. This will enable hotels to apply for loans that will greatly ease the liquidity crisis facing their businesses and keep the lights on. Congress must also pass a second round of PPP to help small businesses keep employees on staff.

As the Treasury and the U.S. House of Representatives negotiate the next stimulus, their continued refusal to acknowledge the reality facing hoteliers and what the collapse of the industry would mean for our economy is as puzzling as it is infuriating. There is still plenty of money on the table, and there are people who need it desperately. America’s hotel owners call on Congress and the White House to expand access to the MSLP and initiate another round of PPP.

Cecil P. Staton is the president and CEO of AAHOA. 

This is a contributed piece to Hotel Business, authored by an industry professional. The thoughts expressed are the perspective of the bylined individual.

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