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April 28, 2020

Citing a ‘fight for survival,’ hotel industry calls for more PPP funding

HBJ File Photo Homewood Suites in downtown Hartford has closed permanently due to economic uncertainty caused by the COVID-19 crisis.
By Joe Cooper

America’s largest hospitality trade group says a new report shows the federal government’s Paycheck Protection Program (PPP) must increase loan limits or else there won’t be enough stimulus funding for small business hotels to stay open and rehire furloughed workers.

The American Hotel and Lodging Association (AHLA) on Monday sent a letter to Congress signed by more than 13,000 hotel operators from all 50 states asking for a larger share of loan funding under the PPP, which is part of the recently adopted Coronavirus Aid, Relief, and Economic Security (CARES) Act.

AHLA is also requesting several technical updates to the CARES Act it says would save hospitality jobs during the pandemic. 

“The additional funding and needed changes to the CARES Act are directly related to our only interests: saving jobs of our employees and supporting our small businesses,” AHLA President and CEO Chip Rogers said in a statement Monday.

[Read more: PPP glitches hamper second round of small business loan funding] 
 
The PPP, which was initially seeded with $349 billion before funds ran dry on April 16, on Monday received another $310 billion so that lenders can offer more forgivable loans to small businesses. During the first round of funding, more than 18,000 Connecticut small businesses received about $4.1 billion in PPP loans, but tens of thousands of companies that applied didn't get aid.
 
According to the report commissioned by AHLA, citing data from STR, the CARES Act covers just 47% of hotel operating costs as revenues will hover between 20% to 40% of their normal levels for the remainder of 2020.
 
SBA requires only 25% of loan proceeds to be used for non-payroll costs, if companies want their loan forgiven, which AHLA says makes it difficult for hotel owners to pay lenders to remain open. Meantime, nearly half of hotels nationwide are closed.
 
“Even after recovery begins, hotels will not generate significant revenue to cover costs, given that hotel occupancy is not projected to return to pre-crisis levels before 2021 and revenue until 2022,” AHLA said.
 
The hospitality industry stands to lose an estimated $194.9 billion over a year, or approximately $16.2 billion monthly on average during the coronavirus pandemic, the report says. In Hartford, the Homewood Suites by Hilton, a 116-room hotel on Asylum Street, has closed its doors for good due to uncertainty surrounding mass COVID-19-related closings and cancellations.
 
About 61% of U.S. hotels, or approximately 33,000, are operated by small business owners, it says.
 
Oxford Economics recently said the economic impact caused by COVID-19 is nine times worse for the hospitality industry compared to the fallout it faced following the terrorist attacks on Sept. 11, 2001.
 
“The hospitality industry is truly engaged in a fight for survival,” Rogers said. “If small business hotel owners can’t pay the mortgage or utilities, they will have to close their doors with no jobs for employees to come back to work.”

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