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Rallying For Relief

By Dennis Nessler | October 5, 2020

While reinforcing the need for another round of stimulus money to help embattled hoteliers, a handful of industry hotel association leaders addressed some other key challenges facing hoteliers, such as current lending conditions and the uncertainty surrounding group business, during a media conference call last week.

Chip Rogers, President and CEO, AH&LA, discussed the potential of another round of funding–including the recently proposed $2.2 trillion Democratic stimulus bill as part of The HEROES Act–while noting the association unilaterally supports both the Democratic and Republican versions of the PPP (Payroll Protection Program).

“We understand the arguments on both sides that are holding this up, but if Congress can’t agree on those items then we would ask them to simply agree on the things they can agree on. There seems to be widespread agreement on the refunding of the PPP. Having it directed toward those businesses that have been hurt the most, we fully support that and it seems like Republicans and Democrats alike both support that as well,” he said.

Rogers further commented on the Federal Reserve’s Main Street Lending Program, which was passed as part of the CARES act, describing it as a “failure to this point” and calling for some modifications.

“It just simply needs the administration to rewrite the rules. They [need to] make sure any real estate or asset backed business who was written out of the first round of Main Street lending is eligible to receive those loans in the same manner that they would from a traditional lender. That would go a long way towards helping a lot of businesses,” he said.

Rogers, meanwhile, was asked about just how much money would be needed to provide meaningful relief and how he sees a recovery shaking out for the lodging industry.

“We’re hoping that the spring and summer is the time of recovery. Clearly, if we continue down the path of a vaccine being readily available first quarter of 2021 then we believe confidence in both business and leisure travel will return. There is some question about when large conventions will start booking again and when they will be held and that may be next summer. But we believe with a vaccine and therapies that we’ll be past this by next spring. How much money would that require? Less than what is in the PPP right now,” he said.

Michael Jacobson, President and CEO, Illinois Hotel & Lodging Association, elaborated on the struggles of getting business travel to return while expressing some frustration with lawmakers.

“Here in Illinois we are subject to very strict restrictions still, including a limit of no more than 50 people. More than half of our total revenue for many of our hotels is reliant on meeting and events or what we call ‘group travel.’ So until those restrictions get eased we’re going to be in a world of pain,” he said.

Jacobson further added, “It has been frustrating to say the least. Especially as we see other states, both republican and democratic, have reopened quicker. We have put so many significant steps in place that protect our employees, protect our guests, where we can safely and responsibly resume meetings and yet these proposals have fallen on deaf ears. I think we’ve showed that in other states that have been allowed to reopen responsibly, including our next door neighbors Indiana,” he said.

Rogers offered an update on the severity of the lending issues facing the industry. “We know on the CMBS [Commercial Mortgage Backed Securities] side that the delinquency rate, which is the first step towards default, is already about a quarter of the hotels across the country that use that type of financing. We can’t imagine that the traditional lenders are much farther behind that, they may be delayed but the percentage ultimately will get there and we’ll see those numbers continue to rise so if we look at reality of today and we say to ourselves that already 25 percent of all hotels are already on that pathway toward foreclosure then we can see just how significant this problem is,” he said, noting the number of hotels impacted could be in the neighborhood of 17,000.

Bijal Patal, Chairman 2020, CH&LA, and CEO, Coast Redwood Hospitality, relayed his his experience while pointing out that the company is currently going through bank negotiations of its own.

“We were able to defer mortgage payments for 6 months, but the small community banks need us to start making payments and we’re not really in a position right now. At 41 percent occupancy we can’t really make those payments so we’re trying to think of things right now, like interest-only payments for the next 3-6 months. We will try to come up with some kind of happy medium that allows us to not enter into default. It is kind of a very scary time and we were fortunate to get those initial 6 months, heading into the winter with no PPP and having our note suddenly be due, it’s definitely a scary time,” he said.

 

 

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Dennis Nessler
Editor-in-Chief

Dennis Nessler is Editor-in-Chief of Hotel Interactive, parent company of Hotel Community Forum. Nessler brings more than 28 years of editorial experience to his position, including some 17 years in the hospitality industry. As part of his duties, Nessler not only covers the industry editorially but moderates various high-level panel sessions at hospitality events and frequently conducts one-on-one interviews with C-level executives.


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