Pleading Their Case

Hotel leaders continue to plead their case for meaningful financial relief to help the industry withstand the impact of the Coronavirus pandemic and that continued with an appeal to Speaker of the House Nancy Pelosi for a number of provisions to current legislation, including the Payroll Protection Program, as well as the Main Street Lending Program.

During AHLA’s ‘Conversations with Chip Rogers’ series earlier this week, Pelosi was joined by Rogers, president, AHLA, as well as Pat Pacious, president/CEO, Choice Hotels International, for a lengthy discussion about some of the industry’s most pressing needs.

Rogers pointed out that after a record setting year of growth in 2019, the lodging industry is poised to have another record year in 2020 but on the negative side of the ledger. He asked Pelosi how she thought that performance can be turned back around?

“We have to so we just have to make a decision to do so. I firmly believe that in order to open the economy and open our schools in a safe way we have to bring down the rate of infection for this virus. It’s absolutely essential,” said Pelosi.

She further pointed to the next round of stimulus being discussed–which currently stands at some $3.4 trillion but is still being negotiated– as being critical to helping drive a recovery. Pelosi specifically pointed out why it’s needed for the lodging industry.

“In many ways it is discretionary [spending]. People decide when they are going to go and where they go next, we want them to decide to spend. A lot of people are concerned about the economy so they’re saving money,” she said.

Pelosi further reinforced the need for the additional stimulus. “We have been told the Bill is too big, but we do know from the Fed if we don’t do something big we’re going to do bigger harm to the economy,” she stated.

Pacious, meanwhile, outlined several ‘asks’ of Pelosi on behalf of the industry, specifically asking that if there is an economic loss threshold added to the PPP, which has been discussed, it needs to be in the 25 to 30 percent range as opposed to the 50 percent that’s been rumored.

In addition, he requested that if there is loan forgiveness for anything under $150,000 as part of the next phase of PPP as has been suggested that the applications are simplified and any documentation requirements be minimal. Pacious further asked that destination management organizations–which are 501-C non-profit organizations and who market to local communities for travel—be allowed access to the program. Employee retention tax credits were also part of the conversation.

Rogers underscored the importance of the PPP for the lodging industry noting some 70 percent of hotel owners have taken advantage of it.

Pelosi commented on the recapitalization, or the second phase, of the PPP. “What we’ve said about the ‘double dip’ is that we don’t want one kind of business to get an overabundance of the loans to the disadvantage of women and minority-owned businesses,” he said.

Pacious also addressed the Main Street Lending Program with Pelosi and noted that the earnings threshold–which is currently 6 times EBITDA, is way too low. The Federal Reserve established the program to support lending to small and medium sized businesses and non-profits that were in sound financial condition prior to COVID 19. Pacious described the program as “really not effective for hotels,” later adding it was “way underutilized.”

Pelosi acknowledged the point from Pacious and promised to check with the Chairman of the Fed on how they arrived at that threshold. “They are doing so much, they’re putting out so much. I know that they thought it was going to be success,” she noted.

Rogers underscored the danger of not providing adequate help to some of these hoteliers noting that delinquency rates are already on the rise.

“Particularly in the CMBS market they’re already at 25 percent, and in New York they’re at 50 percent. The problem is if some of these properties start falling into foreclosure it does begin to spiral downward and pulls a lot of people with them. Once a hotel goes into foreclosure and closes its door for good it’s going to be many years before it reopens again. We’re trying to prevent that from happening,” he said.

Pelosi encouraged the hoteliers to continue to think out of the box for solutions. “Let’s see what we can be thinking of in terms of whatever it is. It may not be this policy it may another approach that enables their ‘survival,’” she noted.

At the onset of the conversation, Pelosi underscored the overall importance of hotels. “The hospitality industry is a joy.  When you think hospitality you think you’re going someplace you can enjoy something and people are going to take care of you. I see it as an industry that employs so many people, in addition to providing that entertainment. So many communities of color find entry-level and beyond jobs in the industry. It’s an asset to the community in so many ways,” she said.