Trade Group: Hotel Layoffs Likely if PPP Loan Limits Aren't Increased
Lawmakers need to amend the CARES Act to cover more costs or risk hotel staff layoffs and closures, according to the American Hotel & Lodging Association.
Small business hotels need higher loan limits in the Paycheck Protection Program outlined in the CARES ACT to keep businesses open and their workers employed, according to the American Hotel & Lodging Association.
COVID-19 has stymied most traveling and crippled the hotel industry, AHLA wrote in a report released Tuesday. Hotel revenue has dropped to 20% compared to 2019 and while the CARES Act was helpful, the AHLA said more relief is needed.
Passed in late March, the CARES Act only covers 47% of a small business hotel’s operating costs, according to the AHLA. The federal-level U.S. Small Business Administration agency requires that only 25% of the loan be used toward non-payroll costs, which makes it difficult for hotel owners to pay lenders and stay in business, the AHLA argued.
“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,” said AHLA president and CEO Chip Rogers in a prepared statement.
According to the association, more than half (61%) of US hotels are defined as small businesses.
To keep small hotels afloat and encourage hotel owners to rehire and maintain their staff, the CARES Act should be amended to raise the loan limit from 250% of average monthly payroll to 800% of average monthly covered costs, the association said.
The road back to normal occupancy and revenue may be extensive, the association warned. Occupancy levels aren’t projected to reach pre-COVID status until 2021, while revenue may not reach pre-crisis levels until 2022, AHLA wrote.
AHLA’s forecast aligns with Carlos Rodriguez Sr.’s, chairman and CEO of Driftwood Capital, which specializes in providing access to hotel acquisition opportunities, projects that it may take roughly two-and-a-half years for the hospitality market to fully rebound.
Hotel construction opportunities are also grave, according to Bill Wilhelm, president of hotel contractor R.D. Olson Construction. Wilhelm’s company predicted hotel assets won’t recover until 2024 and growth won’t reach prior peak activity for the next five years.